How to negotiate a mortgage?
Everyone knows that banks don't take risks, at least with the money they lend you.
What we too often forget is that precisely real estate loans constitute a very important source of income for these financial institutions, your agency wants to lend money because the interest that you will pay it every month is a much like his fixed salary, so you are in a position of superiority.
- 1 Wait for the prior credit offer before negotiating
- 2 How to negotiate the rate?
- 3 How to negotiate the administration fees?
- 4 How to negotiate early repayment indemnities?
- 5 How to negotiate borrower insurance?
- 6 How to negotiate the modularity of deadlines?
- 7 Summary of loan negotiation
Wait for the prior credit offer before negotiating
It is the law, the lender must give you a preliminary offer valid for 15 days, do not say anything before having it in hand, because at this moment and only at this moment you will be able to negotiate by playing on 5 essential points of his proposal :
- the rate ,
- early repayment penalties ,
- borrower insurance ,
- administration fees ,
- modularity of deadlines.
How to negotiate the rate?
Let's start with this one because the success of your project will depend on it, whether you buy your main or secondary residence, or whether you make a rental investment .
Importance of the mortgage rate
If it is important for you, it is also important for the Cashloans which will earn more the higher it is.
The key to negotiating the interest rate for a home loan is to get it as low as possible, while losing as little as possible to Cashloans, or at least the client advisor handling your file.
How to lower the mortgage rate?
- By showing that you are a good customer .
- By having a low debt ratio.
- By playing on the 4 other points of the negotiation, let's continue reading.
How to negotiate the administration fees?
They're supposed to match the amount Cashloans spends on your case and are in fact overpriced upfront, however agreeing to pay a premium can help you get a great rate .
Pay them in exchange for a lower rate
Indeed, the client advisor with whom you deal may have a financial interest in collecting the payment of administrative fees, which is particularly the case when his agency needs to rebuild its own funds .
Simply offer not to discuss the amount in exchange for an effort on the nominal rate .
Example: on a home loan of $ 200,000 , your Cashloans claims administrative fees equivalent to 0.5% , or $ 1,000 . In return, ask him to lower his nominal rate, so that the amount of interest falls by more than $ 1,000 .
How to negotiate early repayment indemnities?
Cashloans tells you: “if you pay off your mortgage before the end of it, I lose money, and I must therefore be compensated” .
So when do you pay off your loan before it ends? When you sell your property or buy back a loan .
Add or remove them
Arrange to include a clause in the loan agreement decreeing the waiver of prepayment indemnities , but don't let Cashloans guess that you are going to sell in the short or medium term, it will affect your rate .
Conversely, if you do not intend to resell , offer to keep these indemnities longer in exchange for an effort on the rate, since you will not cause a loss of earnings for your lender.
How to negotiate borrower insurance?
While the insurance offered by the banks themselves can be more expensive than those of specialized insurers, that said you will lose money to your Cashloans if you do not take out the necessary guarantees with them.
Accept his offer, in exchange for a lower rate
This is therefore a calculation to be made: by choosing the guarantee offered by your Cashloans, you will pay more premium over the entire term of your mortgage, in exchange it must lower your rate so that the difference is compensated .
Example: let's say that the formula offered by the lender will cost you $ 3,000 over the duration of the repayments, while an external insurer would cost you only $ 2,200 . You are therefore going to ask the lender to lower their nominal rate so that the total amount of interest decreases by more than $ 800 ($ 3000- $ 2200 equals $ 800).
How to negotiate the modularity of deadlines?
Too often forgotten about mortgage contracts, it is important that you can increase the payment of your monthly payments in order to finish your repayment earlier, and therefore to lower the total cost of your loan.
Let yourself be free
It is important to check that the maturity modularity clauses are to your advantage, you should know that some banks and credit companies allow their borrowers to increase the payment of their installments by 50% without this being considered as a early repayment .
Why would you want to pay more? Because you end up with a small capital, for example following an inheritance , and you realize that the best investment would be to end the monthly payments of your mortgage as soon as possible .
Summary of loan negotiation
It's not that difficult to play on all these tables , it's all a question of dosage ,
However, the objective of this blog is to provide the knowledge necessary to understand the mechanisms of the contract that your interlocutor offers you.
If you do not feel like a negotiator , or simply if you are short on time , an interesting solution is to get closer to a mortgage broker , who will not only take the steps for you but who will help you. more could very well get you more interesting terms than you could meet on your own.
- negotiate a mortgage modularity clause