When mortgage broker charge you points to lower your rate, who gets that points, the mortgage broker or bank?

Answer 1

If the mortgage BROKER is charging points it is going lender they are selling the loan to. If a mortgage BANKER is charging points they could be going to buy the rate down or into their pocket. Since they banker is using his money to fund it, he does not have to disclose the cost of the loan. A mortgage broker has to disclose by law. That being said, it doesn't mean a mortgage banker will give you a bad deal.
If you want to tell me the terms you are being offered I can tell you if it is reasonable or your getting a bad deal. Although I am a lender, I am NOT soliciting your business. I just provide that service for my online friends. :)

Answer 2

The broker gets the points. Essentially what happens when a broker looks up what the current rates are is they get a specific price from the lenders they work with. For example, say 6.5% today offers a price of 100.00 (Par). That means that if the loan broker locked in your rate at that price he would get 0% or $0 from the lender as a Yield Premium. 101.00 is 1%. 102.00 is 2% and so on. 99.00 is -1%. So potentially if the broker locks your rate below 100.00, he would have to charge you discount points so he doesn't lose money since he has to pay the lender a certain percent of the loan amount to get that specific rate on your behalf. In summary, if the broker wants to make a total of 1% on your loan and you want to buy down your rate by a point. He should charge you 1% origination, 1% discount and lock the loan at 99.00 with the lender. Thats 2% coming from you to the broker's pocket, and 1% going from the brokers pocket to the lender, thus giving the broker a total of 1%. Longwinded, but hopefully that helps out.

Answer 3

The bank get those points. This is actually a prepaid interest. The broker works onder specific contracts with the lenders and it basically is a small % of loan value.
If you compare loans with and without points you will see that over time they are about equal. You will also points sometimes listed as "buydown" again it just a prepaid interest.pp

Answer 4

Points that are paid to lower your rate are known as "discount points" and are paid directly to the lender, so they are going to the bank. Make sure that these are listed as discount points, and not as YSP,(Yield Spread Premium), on your GFE (Good Faith Estimate) before you sign. Yield Spread Premium are points paid to the broker by the bank for up-selling your rate.