What is an Overage?

To put it bluntly, an overage is an excess amount that you've paid on your mortgage, which is likely being pocketed by the loan officer.

Rates and points change daily for various types of loans. The changes are also posted daily, so loan officers are aware of them. An overage happens when a borrower agrees to a loan whose terms are higher than the posted terms for that loan on that day.

Say, for example, that a certain loan is posted at 6.5% and 1 point, but the loan officer gets you to agree to 6.5% and 2 points. That extra point (which is an up-front payment calculated as a percent of the loan amount) is typically split between the lender and the loan officer. So if you pay an extra point on a ,000 loan, that means the lender and the loan officer get an extra a piece.

Overages most often occur because borrowers are unaware of posted changes. While most loan officers are ethical enough to tell you if rates have changed, some are not.

You can protect yourself by telling your loan officer that you know mortgage rates are not set in stone. Ask him or her point blank if they would charge you an overage if rates changed. If your loan officer seems offended or upset by your asking, we'd recommend going elsewhere.

Be sure to read the Loan.com Borrower's Bill of Rights to learn more about what you should demand from a lender.