5 Effective Tips to Negotiate Mortgage with a Lender
Buying a house is no easy business. Right from taking out a loan or mortgage to deciding on the interiors of the place, there is no part of the process that can be taken lightly. Since most of us have only a limited budget to spend in the house, it is important to know how much to spend on what, and how we can save. When it comes to mortgage rates, even 0.5% on such a huge loan can make a significant difference to how much you end up spending both on a monthly basis and in total. Here are some ways in which you can negotiate a better mortgage rate with your lender.
1. Make sure your credit score is excellent
Most banks offer low interest rates to customers with high credit scores. The higher your credit score, the lower you can expect your mortgage rate to be. Use different methods to pull your credit score up as high as possible before you apply to a lender for a loan. Pay off credit card bills. The amount of credit you use from your credit accounts gives you a ‘utilization ratio’ which takes up thirty percent of your credit score. Also, try removing any collection accounts you may have, using any of two ways.
2. Compare rates of different lenders or banks
Since each lender has different rates and fees, it’s a good idea to figure out which one works best for you. Try to get at least three quotes from different lenders. Comparison sites will be a considerable help in giving you an overview of the kind of rates different lenders are offering. However, be sure to personally call up lenders and ask them what they can offer you personally. There is a chance that your individual scores and other details can help you get a lower rate on a mortgage. Figure out which are the best mortgage brokers in Melbourne.
3. Play to your position as a loyal customer
Ask your own bank what they can offer you on a mortgage. Before you make enquiries, it may be a good idea to look at the rates that are being offered to new customers as a strategy to gain more customers. This will only work if you have been a long-time customer if that particular lender and have paid all your bills on time in the past, have other investment loans with them, or have referred other people their way. Asking your bank to offer you the same rates that are being offered to potential new customers because of your loyalty to them might get them to offer you lower rates.
4. Look into the type of loan you want
“One size fit all” rarely works for anything or anyone, and the same goes for loans. Try to find a loan that suits your situation the most. Adjustable rate mortgages are for those who plan on selling their homes in due time. However, if you’re not sure whether you’re going to sell, or you plan on living in the house you’re buying, fixed rate loans are the way to go. On an average, fifteen-year fixed rate mortgages tend to have a lower rate than thirty-year ones, at least by one point.
5. Do not get complacent
A lot of people set a rate with their lender and then continue to pay those rates for years to come, taking the set rates as unchangeable. But the truth is, even rates that have been set after weeks of haggling and researching can be changed. There are several ways to do this, so try to research ways to do it, and keep tabs on the mortgage rates being affected around you.
It might take some work, but mortgages do not necessarily have to be the financial strain that they are popularly perceived to be. A little bit of research, and some strong resolve will go a long way in helping you save for other important things. If a lender is unwilling to budge on rates that you think are out of your budget, do not hesitate to move to other lenders. The process may be a hassle, but it will help in the long run.