How Much Do Mortgage Lenders
Make Per Loan? Learn the many ways banks & lenders profit off mortgage loans. Understanding how they do it can save you up to six figures!

So, you’ve signed the paperwork and you’re eager to enjoy your new home. Besides the monthly mortgage payments, you’re more or less in control, right?

Not quite. That’s what your lender wants you to think.

In reality, they take advantage of every penny you give them, and understanding how they do it could save you thousands.

If, like most homeowners, you want to know how to get a lower mortgage rate or pay less in mortgage interest overall, you’ll need a solid grasp of the rules, your rights, and the factors that affect your rates (mortgage points, origination fees, yield spread premiums, etc.) to stay ahead of the curve.

Keep reading as we explain the most common strategies lenders use to profit from mortgage loans and what you can do to work around them.

Key Takeaways:


  1. Mortgage lenders profit in various ways, including origination fees, yield spread premiums, and interest rates, enabling them to maximize their earnings from each loan.

  2. Homebuyers must carefully navigate mortgage points, origination fees, and yield spread premiums to optimize their loan terms. Understanding these components will empower you to make informed decisions and potentially save up to six figures over your loan term.

  3. Mortgage lenders vs Banks. Each option has its advantages and considerations, such as personalized services, flexibility, and potential cost savings. When you know the differences, you can select the institution that aligns best with your financial goals and preferences.

Interest Rates

In 2020 alone, lenders across the U.S. are estimated to have made a record $3.83 billion on mortgage loans.

With numbers like that, yours may only be a drop in the bucket. Still, understanding your interest rate calculation will reveal how your cash goes to work for the bank.

If you’re like most homeowners, you’ll probably pick a 30-year loan term. In comparison to a 15-year mortgage, you’ll pay a lot less month to month, but your total payment after 30 years might shock you.

Let’s say you get a $300,000, 30-year mortgage with a 3% interest rate.

Even with that relatively low interest rate, you’ll have paid $455,332 total, including interest. That’s an extra $155,332 on top of your original loan amount!

And all that interest goes straight to your lender’s pocket. Pure profit.

Plus, the bank will make sure they get the bulk of your interest (their profit) upfront. By front-end loading your loan, you’ll pay the bank first and your actual loan amount later.

The fact is, whether you go with a 15-year or 30-year loan term, the bank will make money on your interest payments.

Thanks to front-end loading, a lower interest rate might not be the best decision for you. So, you’ll need to review your interest rate options carefully, and consider investing in mortgage points to reduce your rate and save money in the long run.

What Are Mortgage Points?

If you’re hoping to keep some money in your pocket each month, you might want to consider buying mortgage points.

Also known as discount points, mortgage points are fees you can pay your lender up-front in exchange for a lower interest rate.

Generally, one mortgage point will cost 1% of your principal, and can help cut down your mortgage interest rate by .0125%.
So, let’s say you’re applying for a $300,000 loan, this time with a 3.5% interest rate. If you buy 2 mortgage points for $6,000, you’ll get a 3% interest rate and save around $82 on your monthly payment.

That doesn’t seem like much, but over a full 30-year term you’ll save around $29,636 in interest…

Provided you plan on staying in your home for a while!

If you leave your mortgage quickly or decide to refinance, you’ll probably end up losing money.

This is because you haven’t hit your break-even point—the time it takes for your savings to match the amount you paid for the points.

In the above scenario, the break-even point is around six years. So, run the numbers. Make sure mortgage points are worth your time before paying for them, and watch out for origination fees during the mortgage process.

What Are Origination Fees?

Your lender has to make money on their loan services.

So, they may add an origination fee to your tab, which can include charges for opening an account, application and loan processing, and other associated services.

Generally, you can expect this fee to cost anywhere from 0.5% to 1.0% of your loan amount.

So, if you apply for $300,000 with a 1.0% origination fee, you’ll pay $3,000. Origination fees don’t amount to much overall, and you may be able to pay them off upfront.

But make sure to take a close look at the closing costs in your mortgage paperwork. Along with the standard fee your lender charges, they might try to include junk fees.

Steep prices for your loan application, loan underwriting, loan processing, or broker rebates are telltale signs of ‘junk fees.’

Beware of mortgage options without origination fees too. Some lenders will leave out origination fees, making your initial payment more attractive on paper.

The lender is going to make money somehow, and a loan without origination fees almost always means a higher interest rate. If you’re not careful, this could cost you tens or even hundreds of thousands of dollars during your loan term.

Now, let’s talk about yield spread premiums and how they can affect your interest rate.


What Are Yield Spread Premiums?

If you’re working with a mortgage broker (a middleman) instead of going directly to the lender, yield spread premiums might be involved.

Essentially, a yield spread premium is the payment a broker receives from the original lender for their services.

The broker will sell you a slightly higher interest rate than the rate you actually qualify for, then keep the difference as commission.

Sounds like a great way to lose money, right?

Not exactly.

Yes, you’ll pay a higher interest rate during your loan term, but a yield spread premium can eliminate some of your upfront costs.

So, if you’re planning on keeping your mortgage only for a short time, a yield spread premium could be a great option for you.

Don’t forget the fine print!

Yield spread premiums were originally created to protect the borrower. By paying a mortgage broker a yield spread premium, the borrower could avoid out-of-pocket fees.

But over time, brokers began including the cost of a yield spread premium in the borrower’s payments. Eventually, it became just another fee to put money in the lender’s pocket.

While yield spread premiums are heavily regulated today, fraudulent lenders may try to charge you extra, especially if you don’t pay attention to the fine print.

You might only pay an origination fee, a yield spread premium, or a balanced combination of both, depending on your loan structure.

Look out for unusually high costs, especially if your lender gives you a bill for a yield spread premium and an origination fee.

Keeping an eye out for these fees could save you thousands before you even begin your loan term.

Banks vs. Mortgage Lenders

Haven’t decided whether to go with a bank or a mortgage lender yet?

Each option has its perks, and we’ve outlined them below to help you pick the one that’s right for you.

Banks


  1. Convenience: If you have an existing account with a bank, the mortgage process may go a little smoother since you’ve already established a relationship.
  2. No Middleman: Opting for a bank can save you the trouble of searching for a mortgage broker and provide the simplicity and convenience of working directly with your lender.
  3. Bundles and Deals: Banks usually offer a full range of services outside or mortgages, often including bundles and discounts for existing customers.
  4. Security: Banks are beholden to strict federal regulations and placed under greater scrutiny than mortgage brokers, which can provide borrowers with a stronger sense of security.
  5. Potential for Fewer Fees: Mortgage lenders tend to charge more fees and closing costs compared to banks, meaning you may be able to keep more cash in your pocket.

Mortgage Lenders


  1. Personalized Services: Unlike banks, mortgage lenders focus solely on mortgages, so you can count on them having a wider range of services that can be tailored to your needs.
  2. Flexibility: Mortgage lenders are typically willing to work with a wider range of borrowers than banks. You’ll find they tend to have more lenient credit requirements and work with those in unique financial situations (non-traditional income, self-employed, etc.).
  3. More Rates and Loan Terms to Choose From: If you go with a broker, you’ll likely find a wider selection of rates and terms than you would at a bank, which may provide competitive options that could save you money comparatively.
  4. Faster Processing: Efficiency, another perk of specializing in mortgages. Streamlined processing means you’ll generally get approval and funding quicker than you would with a bank.

In the end, it all comes down to what works best for your financial situation and what you’re most comfortable with as a borrower.

Of course, don’t be afraid to shop around!

It’s a big decision, and it warrants plenty of research to ensure you’re informed well enough to set yourself up for success.

Money In The Bank

As they say: Time is money.

That’s especially true for your bank/lender. The longer they keep you under their thumb, the more you’ll pay.

Unfortunately, there’s no way to avoid the lender entirely… unless you plan on paying for your home in cash. But that’s not a realistic solution for us, and we’re guessing it isn’t for you either.

So, we created a better way.

And no, it doesn’t involve selling everything you own to buy the home you’ve always wanted.

It’s called the Money Max Account, and we’ve been perfecting it for decades to help homeowners like you get out of debt as soon as possible.

Your Money, Your Decision

Your mortgage and other debts probably feel like an impossible burden to carry.

Even though you work hard to make a living, it’s still not enough to lift the weight of all that debt off of your shoulders.

That’s where the Money Max Account comes in.

The Money Max Account is a debt elimination software program that can help you pay off your mortgage in as little as 7-10 years. Using advanced banking strategies, it tracks your income, debts, and expenses 24/7 and provides you with personalized debt elimination strategies.

The result? A clear path out of debt tailored specifically to your needs.

That means less money for the bank, and more back in your pocket where it belongs.

The Money Max Account doesn’t work like your bank or lender either. You’ll always decide where your money goes and how it’s used to pay off your debts, and you won’t have to worry about spending thousands on interest payments or losing money to hidden lender fees.

With this proven system, what you see is what you get: A comprehensive account designed to provide you and your family with the lifestyle you choose.

Why provide the bank with unnecessary profit, haggle with mortgage lenders, or let anyone other than you decide how your money gets spent?

The Money Max Account has already helped homeowners eliminate over 2.5 billion dollars in mortgage payments and other debts, and it can work for you too.

If you’ve been wondering how to pay less in mortgage interest without refinancing for a lower mortgage rate and you’re tired of dealing with banks and brokers, set up your free consultation below to see how much time and money the Money Max Account can save you.

Our debt elimination experts are always standing by to answer your questions and help you along the path to financial freedom.

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Cedric M Pierson Independent Agent Phone: 877-771-1979 Email: marcus@piersongroupllc.onmicrosoft.com
Cedric M Pierson
Independent Agent
Phone: 877-771-1979
Email: marcus@piersongroupllc.onmicrosoft.com