Prefer to talk in person? Find a mortgage specialist on Zillow
Profile picture for CLStx

Orig Fee - waive it and Interest Rate goes up?

I wanted to roll my origination fee up into my loan amount and was told that if I waived it (i thought i was just rolling it up into the loan) then interest rate would go up from 5.0 to 5.25.  Why is this?
  • September 10 2009 - Houston
  • 0
    0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (16)

Details....This thread is from September of 2009!
  • February 03 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Justin Kennedy
before you follow the advice of increasing the contracted purchase price and have seller credit the differance from the formor contract price to new slightly higher contract price. if your lender as all ready seen the file and orginal purchase contract, you need to make sure lender will not red flag that change for being an inducment to purchase. hince the reason seller funded down payment programs went belly up.
  • February 03 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

You may see a rate increase if your loan to value exceeds a certain threshold.  This means your brokers commission is reduced.  So, your loan officer would have to increase the rate in order to make more money.  The best person to answer this question would be your broker/lender.  Ask for a loan comparison showing both options as well as an estimate for each senario.  If there's still a lot of grey area, move on to another lender...there are planty of fish in the sea.

  • February 03 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Xcapital Inc Ca
I think there was a misunderstanding in your case since you had the right idea and the rate should not have changed at all. Rolling closing costs including origination fees into the loan would never change the rate unless it pushed the loan to value over an amount that would trigger additional add ons to the fee.  IE if the property were a condo and the loan to value went from 75% to 76% because you increased the loan the rate might increse, but no other time.
  • January 27 2010
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for NRL Mortgage
Discount points are fees paid to a lender at closing in order to lower your mortgage interest rate. While buying points is sometimes a good decision, many times the purchase costs you more than it saves.

How Much Do Points Cost?

The cost of each point is equal to one percent of the loan amount. For instance, for a $100,000 loan one discount point equals $1,000.

WE OFFER ZERO COST LOANS TOO!

  • December 16 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for abrasive
Greg is the only one who clearly explained the issue.

Basically, you have a choice on how your mortgage broker (or bank) gets paid.  The standard fee appears to be 1% of the loan amount.  This is normally charged as a 1% loan origination fee at closing.  However some people prefer not to pay out additional cash at closing (quite understandable) so the alternative is to pay the fee as a yield spread premium (that's translated as "higher interest rate because your broker is being paid by the lender").

Your choice.  As some have noted, there is also a third alternative if you don't have cash and don't want a higher rate - you can increase your offer and request a seller credit towards closing costs.   I have never had a problem doing that but it means that the house must appraise at the higher price since your loan amount will be higher.

In sum, it is your choice, not your lender's choice, but if you want to "roll it up into the loan amount" you will either have to get a seller credit toward closing or pay a higher interest rate.
  • November 25 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Complete misunderstanding,

Stephen
  • September 14 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Many of the below answers miss your point and your loan officer missed your point as well. If you roll the cost into your loan your rate should not go up. If you want fees waived your rate should go up accordingly as the below answers mention. If a reason exists on your refinance loan that closing costs can not be rolled in, then your loan officer should tell you in clear terms that is the case. Keep the lower rate and roll in the cost. If your loan officer convinces you the point rolled in is not a value then have him calculate why the savings to cost ratio is not a value.

  • September 11 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

By increasing the rate the Lender makes monies that replace the origination fee. The Broker or Lender is rewarded part of the early interest you pay, for originating a loan with a higher rate, because this loan is worth more in the secondary market, when they sell it.
  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

CLStx,
It is not the rate that goes up and down but the ysp inside the rate.  The ysp is what the lender will make based on the given rate. 
When a lender doesn't charge a origination or discount fee, then there is enough profit: ysp to do the loan without either of the two.  If you want a lower rate and there isn't any ysp, then the lender will charge a origination fee, but not a discount fee.  So, the lower the rate the lower the ysp till the point where this isn't any and then it turns into discount points and then fees will be charge to you.
  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Rates and fees are a See Saw.  If you don't have the cash to pay the point you either need to increase the loan amount (if possible depending on equity and loan to value) or increase your loan amount...Both mean you are financing the origination fee over the life of the loan!  Will likely cost you more over the life of the loan than if you paid it out of pocket but you won't know that for sure until you sell or refi.
  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

If its a refinance, it may be able to be rolled into the loan if you have the equity and there is room within the maximum LTV. 

If its a purchase, you can't put it into the loan if its a FHA, VA, or conventional loan.  So, he would have to waive the fee.  By increasing the rate, the lender would be paying the origination fee to them directly for their services.

My assumption is this is a purchase or the loan officer just didn't understand what you wanted.  Let us know if its a purchase or refinance.

  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Apparently your rate is not locked and your goal is not clear enough to your loan officer. You wanted something (financed points) and the loan offiecer offered you something else ( waiving the point for rate.  Seems you have the job of making sure your and your loan officer are on the same page.
  • September 10 2009
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I suspect your LO misunderstood you, and instead of adding it to the loan amount rolled it into the interest rate.

If you are refinancing, you can add it to the loan amount assuming you have adequate equity and it won't cause a LTV issue.

If you are purchasing it gets a little trickier.  You would have to get the seller to agree to pay some of your closing costs probably in return for increasing the sales price thus causing your loan amount to increase enough to cover a portion of the origination fee. 
  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Some lenders charge origination fees instead of discount points.  It sounds like you are paying origination to attain a lower rate.  That's all.

Just tell your lender you actually want them to roll the cost into the loan.
  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

If you are concerned about your closing costs, you  can always increase the rate to cover the cost.....origination fee being one of many that you could do that way.

You have to have your L/O explain the differences to you.

Good Luck.
  • September 10 2009
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.