Par Rate / Par Interest Rates
Today I'll explain what a Par rate is.
A par rate is mortage interest rates that have no payback to the broker or lender from the wholesale lender. To expand, wholesale lenders offer brokers (Such as VIP mortgages) and other lenders a percentage payback on particular mortgage interest rates. This payback is compensation for getting the loan. Since a par rate has no payback to the broker or lender, we and other brokers and lenders have to make money a different way, such as an origination fee.
In the past few years, we have saved most of our customers a lot of money by having them pay as little closing costs as possible, (including origination fees), so when the rates go down, we could refinance them again to get a better rate without them losing money for closing costs they paid on thier prior loan.
This has worked expeptionally well and again has saved our customers a lot of money. However, today with rates on the rise, this theory may change and we may begin to suggest more often a par rate.
For a person who intends on living in their home for 7 years or more, we may begin to suggest par rates if they can afford the initial origination fee. That is becuase it generally takes 7 years to get back the money one saves with a lower rate by paying more up front.
Our projection is the Federal Government will raise rates two more times in the next few months which could force rates to rise about a half percent. The better tool for figuring our rates is the bond markets which we will discuss in our next newsletter.
Also, when you see a rate on the internet or on a billboard, please understand that you are usually looking at a par rate and sometimes even lower. They normally don't tell you how much the closing costs or origination fees are until they have built your trust or in some cases , until you get to the closing table. Then they break the bad news and you already have done most of the work, suck it up. Don't fall for this bait and switch. If it looks to good to be true, IT IS!
The reason we are the best is becuase we have the largest variety of loan programs available to us and we are quailfied as a tier #1 broker with the best lenders in the country. Basically, we get paid back more percentage than other brokers, banks, we have a lot less overhead to cover, and were not a greedy. Therefore our mortgage interest rates and our par interest rates are usually the best.
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