Yield Spread Premium: What It Is and How It Affects Mortgage Costs
Warren Team
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Key terms
- MortgageA loan used to purchase real estate where the property serves as collateral. The borrower makes regular payments over a set term (typically 15-30 years) until the loan is paid off.
- PremiumThe amount paid for an insurance policy, typically monthly, quarterly, or annually. Premium costs vary based on coverage amount, deductible, and risk factors.
- YieldThe income return on an investment, expressed as a percentage. For bonds, it's the interest payment divided by the price. For stocks, it's the annual dividend divided by the stock price.
- SpreadThe difference between the bid price (what buyers will pay) and ask price (what sellers want). Narrower spreads indicate higher liquidity and lower transaction costs.
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