Double Dipping is NEVER OK in my opinion, but it is exactly what most do…
Actual example, It’s easiest to use interest only loans, but it applies to ALL loans.
$400K loan PAR 6.625% = Interest= $26,500
You are told 6.875% is the best rate,Interest=$27,500
(just a tiny quarter of a point)
You pay $1,000 more a year for life of the loan.
Lender paid $3000 commission in YSP.
You keep loan 10 years,
1) costs you $10K extra
2) LO got $3,000
You probably didn’t know about either 1 or 2.
Keeping loan longer costs you even more, up to 30 years.
IF given the choice, paying $3K more up front would save you $1,000 a year.
I would just tell you how much I needed to make on the loan and give borrower the choice of how to make that happen, but I don’t “double dip” (Makes me look bad, been told that I don’t charge enough)
If you only plan on keeping loan 2 or 3 years, a “no cost” loan could make total sense, but that ISN’T double dipping either.
In above example, 7.25% would yield a $6500 rebate, which would cover about all closing costs from a fair originator, but still leave you short with others. This “no cost” loan would cost you $2500 more per year in payments.
That’s how the NO COST loan works. People think it’s free.
