How much you pay for a mortgage is dictated by the amount borrowed and the interest rate offered by your lender. The rates are very competitive and change often depending on different factors, but they can still be hammered out to your advantage.
Are you looking to get more favourable terms for your home loan? This is typically done at the end of your current term, but depending on how high your rates are, it may be advantageous to incur a penalty if it saves you money.
For those looking for advice, this is how to negotiate mortgage rates.
Check Out Your Credit Score
Your credit score says a lot about how you handle finances. With every credit application, credit card balance and loan payment, you paint a detailed picture of your creditworthiness and risk, and lenders look to this to determine rates offered to you. While most lenders post static rates for various terms, if you have a good credit score, you can often do better than that.
Contact Equifax and Transition to find out where you stand. This will not only give you a picture of your current debt situation but also empower you to do something about improving your score.
Use a Mortgage Broker
An individual will have a few credit cards, a mortgage, a loan and a credit line with a bank, and this relationship will grow over time. A mortgage broker is different. They have long-standing relationships with multiple lending institutions and actively track the market to see who has the best rates. They also can get better rates because of their influence, which is a win/win/win for them, you and the banks.
Reach out to a mortgage broker and ask for their assistance. The bank typically pays them to bring in new business, which costs nothing. They are also in your corner and work hard to negotiate your best interest rate based on your current financial picture.
Speak to Multiple Lenders
Financial institutions are in the business of money, and the more they lend, the more they make. Banks and credit unions have different cycles where they offer better rates, and it is a competition to attract clients, so it is in your interest to shop around.
You can start a new relationship with a lender, and because they want your business, they may offer you a lower interest rate for your mortgage. Armed with this, you can either bank with them or talk to your current lender about it and use it as a bargaining chip to get a better rate. If unsuccessful, go to the new lender and bring them all your business.
Be a Great Borrower
To strengthen your bargaining position, you must demonstrate how good you are at fulfilling your financial obligations. This includes:
- Regularly paying off credit card debt
- Making timely payments on loans
- Pay off high-interest debt
- Have money invested in different products with the bank
This shows that you are worth the risk and worthy of their best interest rate as a valued customer.
Ask for It
The bank deals with many people; some get better rates than others. While this is mostly because of their overall financial picture, some people don’t accept the posted rate and ask for something better. As simple as it sounds, the squeaky wheel does get more grease, and if you have your financial ducks in a row, it is wise to speak to them directly about giving you a better rate.
The worst thing that can happen is they say no, but you will probably be offered a small bump to satisfy you. Your asking for a better rate shows that you seek more favourable terms and may even consider banking elsewhere. They don’t want to lose your business, so they might reward you for your loyalty.
Watch the Rates
When you get a mortgage, you start your payments and usually don’t think about it anymore. You have a set term with the current interest rate and will happily continue your business. To get a better deal, you should watch where the rates are moving and take action if you can save money. Some mortgages are fixed rates, so you stay the same, regardless of how the market is shifting, so pay attention and then speak to your lender when they go down.
You may be able to switch from a variable to a fixed-rate mortgage or be offered the new rate without incurring a penalty, especially if you are committing to a longer term. By paying attention to the rates, you can save yourself a lot of money.
This is how to negotiate mortgage rates, and it is in your best interest to do so. Ultimately, you will pay down your principal amount faster and have more money in your pocket each month, so be active in your mortgage and seek out the best rates.