Lender Buy Rate vs Par Rate Yield Spread Calculator
Calculate the yield spread premium (YSP) dollar amount generated when a mortgage broker quotes above the lender's buy rate. See who pays it, the rate impact on the borrower, and how it compares to origination points.
What Is the Yield Spread Premium (YSP)?
The yield spread premium (YSP) is compensation paid by a wholesale mortgage lender to a mortgage broker when the broker delivers a loan at an interest rate above the "par rate" — the rate at which the loan prices at exactly 100 cents on the dollar in the secondary mortgage market. For every 0.125% a broker adds above par, the lender pays roughly 0.25-0.50% of the loan amount as YSP. On a $400,000 loan with 1% YSP, the lender pays $4,000 to the broker at closing. The borrower pays this cost indirectly through a higher interest rate over the life of the loan — often tens of thousands of dollars more in total interest than at the par rate. Source: CFPB, 12 CFR §1026.36; cfpb.gov. Last updated: May 2026.
YSP vs Lender Credits vs Discount Points
| Structure | Rate vs Par | Closing Costs | Monthly Payment | Best For |
|---|---|---|---|---|
| Discount Points (below par) | Lower | Higher (borrower pays) | Lower | Long-term holders |
| Par Rate (zero points/credits) | At par | Standard | Standard | Neutral position |
| Lender Credits / YSP (above par) | Higher | Lower (lender pays some) | Higher | Short-term holders, cash-constrained buyers |
How to Use YSP Knowledge as a Borrower
Since the Dodd-Frank Act reforms (2010), mortgage brokers must disclose their total compensation — including any lender-paid component — on the Loan Estimate (LE) and Closing Disclosure (CD) under CFPB Regulation Z. As a borrower, you should request Loan Estimates from at least 3 lenders and compare: (1) the interest rate, (2) the APR (which includes origination fees amortized over the loan term), and (3) the origination charges in Section A of the LE. A higher lender credit means a higher rate. There is no inherently bad choice — the right answer depends on how long you plan to keep the loan. If you plan to sell or refinance within 5 years, lender credits can lower upfront costs efficiently. If you plan to keep the loan for 10+ years, paying points (buying down below par) saves more total interest. Source: CFPB "Know Before You Owe" mortgage initiative, cfpb.gov.
Frequently Asked Questions
What is a yield spread premium (YSP)?
A yield spread premium (YSP) is compensation a wholesale lender pays to a mortgage broker for delivering a loan at an interest rate above the par rate. The broker earns YSP by marking up the borrower's interest rate — the spread generates a premium paid at closing. Disclosed on the Loan Estimate. Source: CFPB, 12 CFR §1026.36.
What is the par rate in mortgage lending?
The par rate is the interest rate at which a loan can be originated and sold to the secondary market at exactly face value — no premium, no discount. At par, there are no origination points and no yield spread paid. Lenders publish rate sheets showing rates above and below par with corresponding points or credits.
Is the yield spread premium disclosed to borrowers?
Yes — under RESPA and CFPB Regulation Z, brokers must disclose their total compensation (including YSP) on the Loan Estimate (LE) and Closing Disclosure (CD). It appears as a lender credit, offsetting closing costs. Borrowers should compare total originator compensation across at least 3 lenders. Source: CFPB, 12 CFR §1026.19.
How does YSP affect the borrower's rate?
YSP increases the borrower's interest rate above the buy rate. On a $400,000 30-year loan, even 0.25% above par can cost tens of thousands in additional interest over the loan's life. Always compare APR — which includes rate plus fees — across lenders to see the true cost.
Was the yield spread premium banned by Dodd-Frank?
No — Dodd-Frank restricted but did not ban YSP. Under 12 CFR §1026.36(d), loan originator compensation cannot be based on loan terms, eliminating rate-based YSP for most loans. Lender-paid compensation to brokers continues in updated structural forms as lender credits disclosed on the Loan Estimate.
Should I take a higher rate with lender credits or pay points for a lower rate?
Use break-even analysis: divide the upfront cost of buying down the rate by the monthly savings to find the break-even month. If you plan to keep the loan longer than break-even, buy points. If you plan to sell or refinance before break-even, take lender credits. Source: CFPB, cfpb.gov.