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Par Rate
The par rate is the interest rate on a home loan with zero points charged.
There are basically no upward or downward adjustments made to the fee.
Previously when yield spread premium (YSP) still exists in the industry, the par rate would be the interest without YSP and points.
Also known as a base rate, this is the very minimum price that a loan has to be sold in order for the lender to avoid a loss-making sale.
When posted prices are delivered to loan officers, whether from a bank or a broker, it will have taken par rate into account.
Meaning that posted prices consists of par rates and a spread.
The spread, which can consist of points can be a critical factor in the profitability of a brokerage.
Borrowers would only be able to obtain a mortgage at par rate in extraordinary circumstances.
When valuing the servicing rights of mortgages, the par rate is also a useful figure in calculations.
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