Home Equity Loans and Rates: How to Get the Lowest Rate
Sorry, but it’s almost impossible to get the lowest rate. Why? Because the odds are simply stacked against you.
Think about it! You play the home mortgage game once or twice in your lifetime. But loan officers and mortgage brokers - your opponents in this high stakes game – play it everyday. They know how the game works. And they also know that you don’t know. That’s how they win and you lose.
But, here’s how the game works! Despite what your loan officer says, it’s just not in their best interest to get you a lower rate. In fact, they want you to pay the highest rate they can get you to pay.
Did you know that loan officers make commissions? They do - about .5-.7%. That means they earn about $500 to $700 on $100,000 mortgage. However, if they can get you to pay higher than the daily posted interest rate, they can actually double their commission. And you wouldn’t even know it happened.
Loan officers receive updated loan prices everyday. The “posted prices” are that day’s rates and points for the different loan packages they have to offer. But the loan officer get offer you a loan at any price he wants that he thinks you can pay. If the loan officer can sell you on paying more than the daily posted price, they earn an extra commission on the difference. In industry jargon, it’s called “overage.”
Let me give you an example. Let’s say the posted price is 6% and 0 points on the loan you want and the lender tells you instead that he can offer you a loan for 6% and 1 point. A point is an upfront payment of 1% of the loan amount. In our example, that would come to an extra $1,000 in fees on your $100,000 mortgage. Typically, the loan officer earns about 50% of the thousand dollars or an “overage” of $500, which, in effect, doubles their commission.
How can you get the “posted price?” Easy! Just ask for it! Request that your loan officer show you the daily rate card and insist that he offer you the lowest rate possible. If you stand firm, the loan officer probably won’t call your bluff. He doesn’t want to lose your business and his basic commission. So you end up winning the game.
Actually, you both win. The banker makes a little and you save a little and everybody’s happy.