Yield spread
A yield spread is the difference between the note rate a lender charges the borrower and the rate paid to whoever funds or owns the loan. The lender keeps that difference as ongoing income.
How a yield spread works
The lender sets the note rate the borrower pays. The capital behind the loan, a capital partner, note buyer or participant, has its own agreed rate. If the note rate is higher, the difference is the lender’s spread, and it is paid as the loan pays interest, usually collected by the lender as servicer before it remits the rest.
With Lender Capital’s direct capital placement, this is how the lender keeps earning after the capital partner funds the whole loan: you keep your origination points (less the placement fee) and earn a yield spread. Price the note above the capital partner’s rate and the difference is yours. The capital partner earns most of the interest; how much you earn depends on pricing with enough margin above its rate.
Why it matters to a private lender
The spread turns a funded-and-sold loan into recurring income, and it rewards the lender for sourcing, underwriting and servicing the loan. It is set when you price the loan, so know the partner’s rate before you quote the borrower.
Example
Hypothetical. A $500,000 loan with a 12% note rate and a capital partner rate of 10% leaves a 2% spread, about $10,000 a year (about $833 a month) while the loan is outstanding, on top of the lender’s points less the placement fee.
Run your own numbers in the lender spread calculator.
Where Lender Capital fits
Lender Capital places first-lien, business-purpose real estate loans with capital partners. You apply once, then submit each loan with the full file. We send it only to capital partners whose criteria it fits, one partner funds the whole loan at closing and it is assigned to them. You keep your points (less the placement fee), earn the spread above the partner’s rate and service the loan. You pay a placement fee only when a loan funds.
Lender Capital is a business-to-business platform. This page is general information, not legal, tax or securities advice. Terms of warehouse lines and other funding sources vary by provider; confirm them with each provider and your counsel.