High Yield Mortgage

High Yield Mortgage

In your search for which mortgage can suit you best, you may encounter the term “high yield mortgage”. Basically, a high yield mortgage is a loan with a higher than average interest rate. The yield refers to the compound interest charged on the mortgage, also known as the Annual Percentage Rate. Basically, yield refers to the interest paid to the mortgage holder, as interest. At the end, this interest is income for the mortgage holder. 

Who can benefit from this type of mortgage? Usually someone with either a poor credit history or someone whose application may present certain factors considered risky.  In this case, the mortgage lender may be reluctant to loan money as the risk of default is greater. In this case, the borrower will have to pay a higher premium. 

So, what benefits come with this type of mortgage? Even though the borrower needs to pay a higher interest rate, there are still a few benefits that come with this type of mortgage. A potential homeowner may not be able to purchase a home without a high yield mortgage and it may be more beneficial for that person to buy a home at a higher interest rate than continue renting. In case the borrower’s credit situation changes for better in the future, the borrower may be able to refinance the mortgage and choose a more advantageous interest rate. 

One important to remember is that there may be another option if you want to reduce your monthly debt payments. Instead of getting a high yield mortgage, you may consider a second mortgages. This way you will have a lower interest rate. 

If you have questions about a High Yield Loan, please contact the professionals at The Costa Group.