The Mortgage Rebate is negative points that are due to the buyer. The discount points are upfront fee to lower the interest rate. The discount points are paid by buyer, while negative points are paid to the buyer. Each point equals one percent.
This entices the buyer to buy a home. Since the buyer pays huge cost to buy a home, the buyer loves the Mortgage Rebate. Mortgage Rebate can offset the down payment, and closing costs.
For example, the home is for sale for $300,000. The buyer agent offers 1 negative point to the buyer. The buyer receives $3,000.
Traditionally, the seller pays five or six percent commission to the seller agent and buyer agent. The seller and buyer agent splits the five or six percent commission. For example, the home is for sale for $300,000. The seller pays $18,000 commission on six percent ($300,000 price x six percent). The seller and buyer agent gets $9,000 each for commission ($18,000 total commission / 2).
On a 1 negative points, the buyer gets $3,000 ($300,000 price x 1 percent). So, the buyer agent takes home a $6,000 commission ($9,000 buyer commission – $3,000 Mortgage Rebate) after buyer agent gives the Mortgage Rebate to the buyer.
The mortgage lenders may advertise like 6% interest rate with 1 discount point, 6.25% interest rate with 0 discount points, 6.50% interest rate with 1 negative point, 6.75% interest rate with 2 negative points, or 7% interest rate with 3 negative points. The negative points are Mortgage Rebate. As the buyer receives higher negative points, the interest rate is usually higher.
Another form of Mortgage Rebate is fixed amount. For example, the buyer receives $1,000, $2,000, $3,000, or $4,000 Fixed Amount Mortgage Rebate. It can also be in the form of gift certificate. Some form of Mortgage Rebate is a credit to the costs of buying a home.
As the buyers rejoice on Mortgage Rebate, some lobbyists wants to ban the Mortgage Rebate. Fortunately, the Mortgage Rebate is still legal on the Sunshine State more commonly known as Florida. Kentucky also allows the use of Mortgage Rebate.
However, the state of Alaska, New Jersey, Kansas, Oklahoma, Rhode Island, Louisiana, South Carolina, Mississippi, West Virginia, and Missouri bans Mortgage Rebate. For Alabama, South Dakota, Oregon, and Tennessee, the Mortgage Rebates are only credits to closing costs.
When you are shopping for Mortgage Rebate, you should check if the Mortgage Rebate is ban in your state. The best Mortgage Rebate can cover the whole closing costs.