What Are Par Mortgage Rates?
By Bob RedtreeWhen looking into a new mortgage loan or refinancing your current mortgage, you may come across the term “Par Mortgage Rates”. Par mortgage rates are actually a very simple to determine, and easy to understand.
This article will go over how par mortgage rates are determined, why they are there, and what they are used for.
How Par Mortgage Rates are Determined
When discussing Mortgage Par Rates, “Par” refers to a mortgage rate that has no discount points or yield spread premium attached. A par rate is by far the best rate to receive when purchasing a mortgage or refinancing your current loan.
What are Points/Discount Points and How Can They Affect the Par Mortgage Rate?
Points, or Discount Points, when in reference to a mortgage, are a fee that the you or the lender may be required to pay in order to achieve a desired interest rate. One point is equal to one percent of the mortgage amount. A lender will pay more for a mortgage that is rated above par rate, and will not pay above the face value of the loan for a loan below the par mortgage rate. Mortgage brokers and lenders are required to disclose the amount of points, if any, included in a mortgage to the borrower.
What is a Yield Spread Premium and how does it affect the Par Mortgage Rate?
A yield spread premium is the mark up that your mortgage broker attaches to a loan so that they will receive a commission from the lender. Lenders will pay this extra to the broker for closing loans that are above market interest rates because these loans return the most profit to the lender in the long run .
Related posts:
- Can I Get A Wholesale Refinance Mortgage Interest Rate?
- How Important Are Points To A Mortgage Rate?
- Should I Pay Points to Lower My Mortgage Interest Rate?
- How Do I Buy Interest Rates Down For A Mortgage?
- What Interest Rates Determine Mortgage Rates?