What is referred to as the retail interest rate that a borrower may receive without incurring discount points?

The term that describes the retail interest rate a borrower may receive without having to pay discount points is known as the Par Rate. This rate reflects the interest level at which a lender offers a loan without requiring additional upfront costs to lower the interest rate. In a mortgage context, when a loan is at par, it indicates that the lender will not charge the borrower additional fees to buy down the interest rate, making it a straightforward option for borrowers.

Additionally, the Par Rate serves as a baseline for lenders to price loans in the marketplace. Borrowers are often most interested in this rate because it provides a clear understanding of the cost of borrowing without complex fee structures. Understanding the Par Rate is essential for both borrowers and loan officers in determining the overall borrowing cost and structuring the loan effectively based on the borrower’s needs.

This concept of Par Rate contrasts with other terms. For example, while the Note Rate is the actual interest rate specified in the mortgage note, it may include points and other costs, unlike the Par Rate which is purely indicative of the base rate before any additional fees. The Market Rate reflects broader economic conditions and can vary widely, while a Fixed Rate denotes a loan with an unchanging interest rate over the term of the loan, but does not