Before obtaining good mortgage rates a borrower must understand what actually is in a mortgage interest rate. There are many factors that affect all mortgage rates in every mortgage transaction. Discount points, origination fees, Yield Spread Premium, and 3rd party fees are a few factors that can change your interest rate.

Discount points is prepaid interest that is used to lower a mortgage rate. They are tax deductible, and can help lower your monthly payments. One discount point is equivalent to 1 or $1,600 of your mortgage loan amount.

Discount points MAY lower your mortgage rate by 0.5.

If your current mortgage rate was 6.5. By lowering your rate, you will also be lowering your monthly mortgage payment. The one time closing cost will be 1,600, and will be recovered between 3-4yrs. The way to calculate this is to subtract the higher mortgage payment from the new payment, and divide it by the 1,600.

Origination fees work the same way as discount points do. One point is equivalent to 1 in total origination fees, discount points, and YSP. Some lenders may charge more, but it is still negotiable. Mortgage lenders & Banks aren't required to disclose YSP. You will normally see the interest rate with origination fees and/or discount points. Mortgage brokers are required to show YSP, and is disclosed on a Good Faith Estimate, and HUD-1 statement. Due to higher overhead costs, a mortgage lender and bank can charge a lot more fees than mortgage brokers.