Par Rate
The base interest rate a lender offers on a loan with no discount points paid and no lender credit given — the neutral rate before any buydown or credit adjusts it up or down.
The par rate is the interest rate at which a loan prices out to zero net cost from rate — you pay no discount points to lower it, and you receive no lender credit for taking a higher rate. It's the anchor point on a lender's rate sheet from which every other quote is an adjustment up or down.
Why it matters
Every rate quote is a trade-off between rate and cost:
- Pay points → rate goes below par (a rate buydown).
- Take a credit → rate goes above par (the lender pays some of your costs).
- Pay/receive nothing from rate → you're at par.
Understanding par lets an investor see exactly what they're paying for. A rate that looks low may carry several points; a 'no-cost' loan is simply a rate priced above par so the credit covers fees.
A worked example
A lender's sheet for a $250,000 DSCR loan might read:
Rate 7.50% → cost 1.5 points ($3,750) (below par)
Rate 8.00% → cost 0.0 points ($0) ← PAR
Rate 8.50% → credit 1.0 point ($2,500) (above par)
Here 8.00% is par. At 7.50% you're buying the rate down for $3,750; at 8.50% the lender hands you $2,500 toward closing costs. Same loan, three different rate/cost combinations.
How it's used in investor lending
Par is the reference frame for comparing offers. Two lenders quoting '8%' aren't equal if one is at par and the other includes a point. When you collect quotes for a DSCR or hard money loan, ask each lender for the par rate and the full rate-and-points grid so you're comparing apples to apples. Then decide whether to buy down (lower long-run cost) or take a credit (preserve cash now) based on your hold period and the breakeven on the origination fee and points.
This is general information, not financial advice.
Frequently asked questions
How do I find the par rate on a quote?
Ask the lender for the row on their rate sheet where points equal zero and there's no lender credit. That's par. Everything above it carries a credit; everything below it costs points. Many lenders won't volunteer par unless you ask, so request the full rate-and-cost grid.
Is the par rate the best rate?
Not necessarily — it's the neutral one. A rate below par may save money long-term if you pay the points and hold long enough to break even. A rate above par preserves cash now via a lender credit. Par is simply the baseline you measure those trade-offs against.
Why do two lenders quote the same rate but different costs?
Because their par rates and pricing differ. One lender's quoted rate might be at par while another's includes a point or a credit. Always compare the rate together with the points and fees, not the rate alone.