Blog: broker vs retail

The interest rate determines the amount of interest paid on your loan, but it doesn't reflect the fees or other charges that you may have paid to get the loan. The APR is a broader measure of the cost of borrowing money that considers the interest rate plus fees. For that reason, your APR is usually higher than your interest rate.

The Prime APR is based on a weekly survey that collects data for a hypothetical, "best quality," 80% loan-to-value, first lien mortgage. As a baseline this measure can be used to quantify the relative price of a loan compared to prevailing mortgage rates at a given week, making it possible to compare pricing on separate loans that were originated in different time periods.

The difference between the actual APR on a specific loan and the Prime APR from the week that the actual rate lock occurred. If the variance is negative, this means the APR was lower than the Prime APR and vice versa if the variance was positive. 

When the company the loan officer works with also underwrites, closes and funds your loan this considered a retail loan. They work for a specific company that sets the pricing on interest rates for your loan.

A broker is independent from the company that underwrites, closes and funds your loan. They can usually work with a handful of lenders and pick a lender that best suits your needs. This data doesn't contain any details from individual brokers, rather it includes data from the wholesale lender that underwrites, closes and funds the loan for the broker.

This calculation is based on savings from the full term of a 30 year fixed loan. In order to realize $10,000 in savings over 30 years, if prevailing interest rates are 5.00% on a 250,000 loan then you need to get a rate of 4.82%. However, even if you get this rate, $10,000 is a bit of an over estimation considering that the vast majority of borrowers will refinance or move within the first 5 years of the loan term.