Par Rate
Par rate is the interest rate at which a mortgage can be funded with zero discount points paid by the borrower and zero lender credits — it is the direct lender's baseline price for a given loan scenario. Rates below par require the borrower to pay points to buy the rate down; rates above par generate lender credits that offset closing costs. Par rate is the most commonly quoted rate in mortgage advertising and represents the true cost-neutral offer from a direct lender.
Every direct lender's rate sheet centers around par pricing. On any given day, a direct lender might quote a par rate of 6.875% on a 30-year fixed conventional loan. A borrower who wants 6.625% would pay 0.75–1.00 discount points (0.75%–1.00% of the loan balance) to buy the rate down. A borrower who wants to minimize upfront closing costs could accept 7.125% and receive a 0.50% lender credit back toward those costs. The par rate is where neither party subsidizes the other.
Par rate changes constantly with market conditions. When the 10-year Treasury yield rises 0.25%, par rates across direct lenders typically rise within hours. When MBS prices improve — often when economic data comes in weaker than expected — direct lenders push their par rates lower to capture more applications. This daily movement is why borrowers are advised to lock their rate once they've found competitive par pricing from a direct lender, rather than waiting and speculating on favorable market movement.
Understanding par rate helps borrowers evaluate whether a direct lender is being transparent. A lender who quotes 6.50% but doesn't mention that it costs 1.5 points is not quoting at par — they are quoting below par and disclosing the cost only in the fine print. Ask any direct lender: 'What is your par rate today for my scenario?' An honest answer with zero points is the clearest apples-to-apples basis for rate comparison.
Key Takeaway
Par rate is the interest rate at which a mortgage can be funded with zero discount points paid by the borrower and zero lender credits — it is the direct lender's baseline price for a given loan scenario. Rates below par require the borrower to pay points to buy the rate down; rates above par generate lender credits that offset closing costs. Par rate is the most commonly quoted rate in mortgage advertising and represents the true cost-neutral offer from a direct lender.
Related Terms
Frequently Asked Questions
Par rate is the interest rate available from a direct lender with no points paid and no lender credits received — it is the cost-neutral pricing baseline. It is the most straightforward way to compare rates across multiple direct lenders.
It depends on how long you plan to keep the loan. Paying 1 point (1% of the loan amount) on a $400,000 mortgage costs $4,000 upfront. If paying a point reduces your rate by 0.25%, you save about $50/month — breaking even in roughly 80 months (6.7 years). If you'll stay longer, pay points; if shorter, take the par rate or lender credits.
Not always. Some direct lenders advertise below-par rates that require discount points to obtain. Always ask for the APR, the points required, and the par rate with zero points to make an accurate comparison.
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