A mortgage can be negotiated around five essential points. The rate, early repayment penalties, borrower insurance, application fees, and modularity of deadlines. In the end, what matters is the cost of credit and the adaptation of the contract to your professional situation.
1. Negotiate the real estate rate
Every week, bank branches receive rate schedules corresponding to different borrower profiles. If the differences vary from single to double between the personal and professional situations of applicants, averages are established every month. So, check the real estate rate before finalizing anything.
2. Negotiate the administrative fees
The application fees are supposed to correspond to the amount spent by the bank to study your request. In practice, they are mainly intended to compensate for the shortfall of lenders, due to the low level of interest rates.
The client advisor you have in front of you may have received the objective of collecting a certain number of administrative fees. This is perhaps the opportunity to take advantage of it by agreeing to pay the maximum for a better nominal rate.
3. Negotiate early repayment indemnities
- If you pay off your mortgage early, your bank loses money. Therefore, it wants to be compensated, and the law allows it to charge you prepayment indemnities. These penalties are framed, so they can’t exceed the amounts listed below:
- 2-5% of the outstanding capital,
- Or 80% of the next 6 months of interest.
However, the lender is free to apply them or not. For example, a contract can provide for the application of repayment indemnities during the first 7 years of the mortgage.
If you do not intend to move, for example, if it is a second property acquisition, you can reassure your client advisor. Negotiate, for example, the extension of the validity of repayment indemnities, in exchange for a preferential real estate rate.
The reverse also works: you accept a higher interest rate for a shortened repayment indemnity validity.
4. Negotiate borrower insurance
Your bank does not have the right to impose its insurance policy on you, but on the other hand, it has the right to apply the real estate rate it wants. You can very well negotiate a better real estate rate, in exchange for accepting his loan insurance contract.
Admittedly, the contributions are undoubtedly more expensive, but you have 12 months after signing the preliminary offer of credit to find less expensive and more complete formulas.
And, even if you missed the deadline, you have the right to change borrower insurance every year. The only condition is to provide equivalent guarantees.
5. Negotiate the modularity of deadlines
You are going to buy your home to live for decades, so just keep in mind that things won’t remain the same after a few years. You could experience financial difficulties in the years to come, so make sure you have the option for activating the clause of modularity of deadlines, which by the way is present in the majority of contracts.
This mechanism allows the borrower to reduce the number of his monthly payments, or even to pay none for several months. Of course, this service is payable, which can take several forms:
- Increase the rate after the transfer,
- Interim interest during the postponement,
- Limited free postponement (for example 3 months maximum).
Your goal is to take advantage from the least costly possible deferral, which will depend on your quality as a borrower. However, the level of this quality can be difficult to assess, and above all, it can be difficult to find the right bank, the one looking for your profile.
You should also ensure that your loan application is strong in case, you have a few more days to lock your application. A stronger application will allow you to have the advantage to negotiate your mortgage rate. Moreover, if your finances are better, then you will attract more lenders towards your application. With more lenders dealing with you, the chances of negotiating a deal of your choice become brighter. If you don’t know if your application is strong, then you should consult an experienced mortgage broker to get the right assistance.
Here is what you can do to have a strong application:
- A high credit score – Make sure that your credit score is good. If your score is not what is required to negotiate a better deal, then you should consult an expert to know how you can raise your credit score.
- A bigger down payment – A larger down payment leads to a lower mortgage rate, plus you can save even more by putting 20% down along with avoiding mortgage insurance.
- Lower monthly debts – If you want to lower your debt to income ratio (DTI), then pay off some of the debts you have. Doing this won’t just lead to a lower DTI ratio, but also a lower mortgage rate.
To negotiate a mortgage while avoiding consuming your leisure time, you have the option of calling on a mortgage broker from PIF Lending. A mortgage broker will be able to find the most suitable contract for your situation.
Why should you shop to negotiate rates?
Mortgages have become a lot more regulated than they used to be. Therefore, individual loan officers don’t have much flexibility to change rates from customer to customer. This is the reason that you should compare loan estimates and purchasing discount points for lowering the interest rate instead of bargaining with your loan officer. The market today is very dynamic, as you will find some lenders a lot more efficient than others. Those lenders lower their operating costs by using online applications and digital processing. The money that is saved in the process is passed onto the customers.
Once the loan amount is deposited into your bank account, you can pay the owner of the property. In case, you find any trouble getting the mortgage loan, then you must get in touch with a professional mortgage broker to successfully get your loan processed and approved. Follow this link to reach out to the best mortgage broker in Las Vegas who can assist you with the smooth processing of home mortgage approval.