I’m a CPA but am not entirely sure how the mortgage brokering process works. I’ve received some sketchy information in the past indicating to me that the higher the rate is, the more of a commission the bank pays to the broker for bringing them the loan. I believe the exact terms are when the rate is above the bank "par rate". Now I’ve heard that if the broker brings the bank an adjustable rate loan that the broker receives and even higher Commission. Is this true?
Thanks,
Craig R. Fechter, CPA
It is true that the broker gets paid for an above par rate but not true that they are paid more for an adustable rate. The reason that some brokers and lenders for the matter push an adjustable rate is that it is lower than a fixed rate and "easier to sell". It’s unfortunate but many loan officers are just sales people and will sell what they think is easiest instead of what is best for you.
Yes. Their commission comes from the rate spread. Adjustable mortgages and all those fancy instruments have higher yield spread premiums.
References :
Unless you have a fixed-rate mortgage, the current mortgage interest rates are very important to deciding how much you should pay every month<!–therefore it is always a good idea to keep an eye on what the rates are doing. If interest rates should rise, so will your monthly payments and again, if interest rates were to fall, so would the amount you would have to pay.
http://mortgages-finance.awardspace.com/Mortgage-Rate-Compare.htm
Monthly repayments made on your mortgage and the amount that was borrowed, is determined by current mortgage interest rates. Different–>companies offer different interest rates so it is a good idea to shop around for the best deal before settling on one particular lender.
References :
It is true that the broker gets paid for an above par rate but not true that they are paid more for an adustable rate. The reason that some brokers and lenders for the matter push an adjustable rate is that it is lower than a fixed rate and "easier to sell". It’s unfortunate but many loan officers are just sales people and will sell what they think is easiest instead of what is best for you.
References :
http://www.mortgagelenders.us.com
http://www.real-mortgage-quotes.com