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Rates |
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Rebates |
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Closing Costs |
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Planners Mortgage 800 733-2965 |
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California “No Points-Closing Cost Rebates” Home Loans |
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How “No–Points-Closing Costs Rebates” Works |
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Mortgage brokers, like other retailers, earn a living by the difference between the wholesale price of our inventory and the retail price we charge a customer. Our inventory consists of mortgage programs instead of shoes, tires, or jet skis, but the principle is exactly the same. For example, on a given day, one of our wholesale lenders might offer us the following choices for a $250,000, 30-year term fixed rate loan: |
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Since our markup for a loan like this is about one point, we would offer the following retail quotes: |
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Since non-recurring closing costs on a $250,000 loan total approximately $2,500, a one point rebate in this example is essentially a “no closing cost” loan. Of course there is no such thing as a true “no-cost” loan, since things like appraisal fees and title insurance do need to be paid, but in many cases it can be an advantage to pay these fees by taking a higher rate and using the rebate to pay them, rather than increasing the loan amount a few thousand dollars to generate the additional cash needed to pay the fees. Clients often ask our advice about which pricing option to select. Is it better to pay points and costs, or keep both as low as possible and accept a higher rate? Of course, there is no single answer. Our advice depends on the specific rate and fee combinations we have available on that given day, and how long that individual borrower expects to keep their mortgage. Assuming that a loan is open for around five years, 1/8 of a percent in rate is roughly equal to a half point in loan fee. Therefore, if we can buy the rate down 1/8 of a percent for less than half a point in loan fee, we would usually advise you to do so. If the cost is more than a half point to buy the rate down 1/8%, we will generally advise you instead to take the higher rate, lower up front cost combination. It’s important to note that we disclose to you in writing both the total rebate we are receiving and the proportion of the rebate that we will credit to you. Our compensation is substantially the same no matter which pricing option you choose, so we are able to offer objective advice about all of your pricing options. Our rebates are an immediate dollar credit in escrow, so there is never any doubt or delay in receiving the funds. |
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Real Estate Broker, California Department of Real Estate #0550047 NMLS #355194 (Company), 342932 (Individual) |