The posted rate is the official mortgage interest rate advertised by banks and lenders. It is usually higher than the rate most borrowers actually receive, since lenders often offer discounts based on creditworthiness and competition.
How It’s Used
Posted rates are used as a starting point for negotiations. They also play a role in calculating mortgage penalties for breaking a term early, since lenders may compare your contract rate to their posted rate to determine the cost.
Why It Matters
- Negotiation: Borrowers can often negotiate a rate much lower than the posted rate.
- Penalties: Posted rates are used to calculate the Interest Rate Differential (IRD) penalty.
Final Thoughts
While posted rates rarely reflect the actual rates borrowers pay, they are important benchmarks in the mortgage market. Knowing the difference helps borrowers negotiate better deals and understand potential penalties.