If you are considering refinancing your existing home mortgage loan a par mortgage rate could save you thousands of dollars every year that you have the mortgage. The problem is that all of the mortgage rate quotes you see online and from your local mortgage companies include some markup to create a commission for the loan originator.
Here are the basics you need to know about par mortgage rates to help you get the lowest rate and monthly payment when refinancing your mortgage loan.
A “Par” mortgage rate is one that does not cost money to get or creates cash for the mortgage broker as a commission.
Mortgage rate sheets used by your Mortgage Company or broker are listed on a scale. Going from one side of the rate sheet to the other, the lower the mortgage rate the more you’ll need to pay in “discount points” to get that lower rate. As you move further along the scale there is a point where no points are required. This point on the rate sheet is a “par mortgage rate.” Move further along the rate sheet and you’ll see that mortgage rates higher than “par” creates cash commission in the form of Yield Spread Premium.
Here’s an example to illustrate how mortgage rate sheets quote an interest rate:
5.75% (.5 point required) 5.875% (.25 point required)
6.0% (zero points) Par Mortgage Rate
6.125% (.25% commission created) 6.25% (.5% commission created)
As you can see, 6% is the par mortgage rate of the day. Mortgage rates above 6% create cash for the Mortgage Company or broker while rates below 6% cost you money in the form of discount points. If you want the lowest possible mortgage rate when refinancing you’ll need to get as close to par as possible without creating Yield Spread Premium for the mortgage broker.
How do you get a par mortgage rate? You can get a par mortgage rate by paying a flat 1% origination fee to the person arranging your mortgage loan. Doing this is easier than you think; you just need to find the right mortgage broker for the job.
The free mortgage refinancing videos on this website show you how to get a par mortgage rate while avoiding lender junk fees in the process. Register today and you’ll be on your way to saving thousands of dollars every year on your next mortgage loan.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
