I have had many people telling me lately that they are planning to re-negotiate their mortgage and this got me thinking that maybe this should be something we are considering this year. As I look into this further and learned more about the process, itself – what I actually found out was that many people, like myself opt to simply renew their mortgage each time, without considering re-negotiating at all.
Since having a mortgage is likely to be the largest of all of your monthly expenses, it makes perfect sense to try and see where we can try and save some money and make the repayment plan a lot easier. With that being said, there are some strategies that can effectively help you mange your mortgage payments and pay it down a heck go a lot more successfully.
Mortgage Negotiation Tips
1. Start Shopping Around Early
Even well before the renewal date, you can shop around for mortgage lenders with better rates and mortgage terms. Typically 4 to 6 months ahead of time it is a good timeline to start looking for discounted rates, especially if your current rates are set to rise. This can prove to be a good timeline for approaching lenders and beginning mortgage negotiations. You may even want to think about getting a lender who isn’t a big bank.
Even before you begin negotiations from your current bank, you can look for rates offered through other lenders. Specifically, there are sites that will post what the current rates are from a variety of lending banks. Typically these rates can be quite diverse and therefore worth investigating.
2. Don’t Immediately Accept the Bank’s Posted Rate
There are plenty of instances where banks will offer rates and just assume borrowers will not question them. However, if you actually come out and ask for a better rate you may be surprised what numbers they can actually produce for you.
For example, if you do determine that the bank is offering you a mortgage with highly satisfactory terms and features, however the rate is still quite high – you can also ask them to match a lower interest rate that you have found from a competing lender.
3. Consider all Loan Features (Not Just the Rate)
Length of Term
As well as negotiating the mortgage rates you should also not forget to inquire about other favourable mortgage features. The term length is an important piece of the puzzle as it greatly impacts how effectively you can pay it off. If for example, you have a 15 year mortgage term, it is likely that while you technically pay it off in less time than you will pay off a 30 term mortgage, your monthly payments may be a lot higher in order for you to pay off the total balance of the loan in time. So, it really does depend on what is best for you in the long run and what you can afford.
Type of Rate
The type of rate you have is also a mortgage feature worth discussing as this also determines how much interest you can expect to pay over each month. Fixed rates can be a better option for some people, as this rate stays the same and will not increase significantly and without warning. However if you have a variable rate, then while you may start with a lower rate, this rate can increase suddenly and make it more difficult for you to pay off. Choosing the suitable rate in combination with the term length is also key.
Your payment schedule, whether it is weekly, biweekly, accelerated biweekly or monthly, will also influence how well you manage your mortgage. You can negotiate having prepayment flexibility built into your mortgage features, which means you have the option of making payments sooner and more often to help you speed up your re-payment plan. If, however you don’t already have this feature put in place and you make a payment too soon, it is important to understand that you will be charged penalty fees on top of what you are already paying.
Ultimately, it is the rate, the term, the type of rate, and the payment plan which will all dictate how successful you are in paying off your mortgage, and so attention to all of these features matter greatly during mortgage re-negotiations.
4. Choose a Mortgage Broker
The reality of it is that not all of us are good at negotiating our own mortgage. Perhaps even it is a matter of not having the time or energy to do so as well. Either way, this is definitely a strong reason for having a broker perform these actions for you. They can act as the liaison between you and the lender and because they have a network of lenders to pull from, they can be even more effective at finding you the best rates and features.
Not only can brokers help to find you a better mortgage, as well as saving you some time and hassle, they are also willing to work with individuals with less than perfect credit. Ultimately, a broker is more likely to help secure you a better rate, compared to if you approach a bank or lender on your own with poor credit. Often times, you are either denied a loan or will not be able to obtain the rates and features you want because of bad credit/low household income and therefore mortgage renovations may not goes as well as you would like.
Whether you are re-negotiating your current financing or going through the first time home-buyers process, learning more about how a broker can help as oppose to a bank or another lender will be a worthwhile step and can help you save money in the long run.
If you are hesitant to re-negotiate your mortgage, however you know it will be a beneficial way of lowering your mortgage payments, then making sure you are informed about how to be the best re-negotiator you can be is a great first step.
Additionally, if you want the expertise of a mortgage broker – then it is great to know this is an available option for you. In the end, you may actually have more leverage than you think and it is better to give it a try and see what happens – achieving better interest rates may just be the end result and this is definitely worth taking advantage of.
Hope you find these tips and suggestions as helpful as I have. Good luck re-negotiating your mortgage – you never never know what will come of it!