1. Know what it means to negotiate a mortgage loan
If you are applying for a mortgage loan for the first time or if you are renewing your current loan, you will find mortgage rates displayed at financial institutions. You may not know that it is always possible to get a better rate than the one shown, provided you negotiate.
For example, if the five-year fixed rate posted is 3%, you can negotiate the interest rate downward. Besides the interest rate, you can also negotiate certain contract details, such as prepayment options and cash back benefits. What you can get really depends on your negotiating skills.
2. Know when to negotiate a mortgage
Generally speaking, there are three specific times when you should negotiate your mortgage.
a) When obtaining a new mortgage loan.
This is probably the best time to negotiate, as several lenders will want to get your contract. Take the time to shop around or see if your preferred lender is willing to match or outperform the competition.
b) When renewing your mortgage loan.
Your current lender will send you a renewal letter a few months before your mortgage comes due. Instead of accepting the contract, look at other offers made to you, as you could save a lot by switching lenders.
c) During the term of your mortgage loan.
If mortgage rates have fallen, you can renegotiate or refinance your mortgage to get a better rate, even before the term expires. However, be sure to find out what early repayment fees apply.
Never stop at the first idea. Sivasailam Thiagarajan
3. Ask for a discount
Financial institutions list mortgage rates, but they will likely give you a discount if you ask and submit a strong application. The size of the discount will depend on current market conditions and the lender’s track record.
You’re probably wondering why the lender bothers showing rates if you’re getting a discount anyway. It happens that poorly informed buyers accept the posted rates. More importantly, lenders use the posted rate to calculate the interest rate gap prepayment penalty if you need to break your mortgage.
4. Shop around
You should always shop around when getting a new mortgage or renewing your current loan. Even though the mortgage rates offered by different lenders are similar, the difference between rates can save you thousands of Swiss Francs. Simply call a few lenders and ask them what the best rate they can offer you is. In many cases, you simply fill out an application online, saving you the hassle of picking up the phone. With the different quotes in hand, you can then see if your preferred lender is willing to match the lowest rate you received.
5. Use a mortgage broker
If you don’t have time to shop around, you can use the services of a mortgage broker. Mortgage brokers do not work for a specific lender; they can therefore contact several lenders to find you the lowest rate and the best conditions. Mortgage brokers are also helpful for applicants who are in special circumstances, such as the self-employed. Since mortgage brokers are paid by the lender, there is no reason not to use one.
6. Monitor rates
Even if you’re not shopping for a new mortgage, it’s a good idea to keep an eye on rates. Let’s say you have a fixed-rate mortgage, but interest rates have dropped. You may want to check with your lender to see if you can combine and extend your mortgage. This would allow you to get a new mortgage at a rate in between your original loan and current rates. If you have a variable mortgage and rates start to rise, your lender may let you move to a fixed-rate mortgage. Either way, you could save a lot of money just by making this change.
7. Think about your goals
Although many people focus on the interest rate when negotiating their mortgage, you may also want to consider prepayment penalties. The ability to make extra payments on your mortgage without having to pay a fee for this privilege can be extremely beneficial. This is especially useful for people who know they will soon have a large amount of money.
8. Make sure your application is well presented
Very often, getting the best interest rate comes down to an excellent application. If you have a good down payment and excellent credit history, lenders will be more likely to give you the best rates because they can trust you to repay the loan. A stable income is also helpful because lenders will want to know how you will make your payments. If you have outstanding debts, you can try to reduce them before applying for a mortgage, as this will improve your total debt-to-income ratio.
It’s easy to get or renew a mortgage, but you should never accept the first offer you get. Instead, shop around and negotiate until you get a contract that meets your needs.
2024-02-28 19:32:40
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