Third Level 1
Third Level 2
Third Level 3
Third Level 4
Third Level 5

Headline

This column is a good place for third level navigation or additional content. The headline above is made up of two graphics and text so it is easily modified to meet your needs.

Points--cont.

Now it gets interesting. If “par” costs nothing, then what do the interest rates higher par cost? Not only do they cost zero, but the bank actually gives the lender a rebate, which is nothing more than a “reward” for bringing them a loan with a higher than average interest rate.

If we continue with our example above, the 6.5% interest rate might have a rebate of 1%. Remember, that is 1% of the loan amount. A 6.75% rate might give the lender a rebate of 1.75% and a rate of 7% might be a rebate of 2.25%. As you can see, as the rate gets higher (less desirable) the less it costs. With our example, an 8% interest rate might give the lender as much as a 4% rebate. With a loan amount of $400,000, that’s $16,000 in rebates to the lender.

As you can see, a rebate can be big bucks! What does the lender do with all of that money? In some cases, the lender keeps all of the rebate as his profit for doing the loan.

This is the easiest way for a lender to make money. The rebate is listed in the loan documents on the Good Faith Estimate, but borrowers seldom notice it. Even though by law any rebate is disclosed to the borrower, most don’t know that it is money being given to the lender. Therefore, a rebate could be considered “hidden income” to the lender.