How to Calculate Percent of Home Equity as a Brokerage Commission
When you decide to take out a home equity loan on your property, you will most likely have to pay a commission to the broker or financial institution that originates the home equity loan. A front-end commission will appear as an origination fee on your settlement statement. A back-end commission, also known as a yield spread premium or service rate premium, is a commission paid by the lender. This back-end commission may not appear on your settlement statement.
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Instructions
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Multiply the number of origination points by your home equity loan amount. Each origination point represents 1 percent of the loan's value. For example, assume your loan requires you to pay two origination points and your loan amount is $200,000; $200,000 x .02 = $4,000. This figure represents the front-end commission paid on your home equity loan.
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Multiply the back-end commission percentage by your loan amount. For example, assume the loan pays a 1 percent yield spread premium. Continuing the same example, $200,000 x 0.1 = $2,000.
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Add the front-end to the back-end commission figure. Continuing the same example, $4,000 + $2,000 = $6,000. This figure represents the total commission paid on the home equity loan.
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Tips & Warnings
Back-end commission results from a broker or financial institution charging a higher interest rate on your home equity loan. The mortgage lender then compensates the broker or financial institution for charging you this higher rate of interest. Mortgage brokers have to disclose this figure on the settlement statement. However, mortgage lenders and banks do not have to disclose this payment to you.
