A rebate is a credit to the borrower by the lender for taking an interest rate higher than the zero point rate. The lender hopes to recapture the amount paid by collecting a higher interest rate over the life of the loan. Rebates may be used to offset any non-recurring closing costs, including the guaranteed lender fee, appraisal, closing agent, title insurance, recording and/or transfer taxes. Rebates may not be used to offset prepaid expenses, such as prepaid interest, initial escrow/impound account deposit or homeowner’s insurance premium.
