Negotiating your mortgage can seem like a torturous experience, especially if it's your first time sitting down to the bargaining table. Even so, having little or no experience making one of life's biggest purchases doesn't mean that you're destined to be saddled with a sky-high interest rate.
If you're on the hunt for the best mortgage rate, take a hint from the online mortgage experts at FamilyLending.ca and become a better negotiator. Here are a handful of tips to help you haggle like a professional.
1) Know your long-term goals
How long do you expect to live in your home? Are you anticipating any big life changes in the next few years — children, marriage, retirement, etc.? How stable is your income? How you answer these questions will have a direct impact on your approach to mortgage negotiations. For example, if you know your job will require you to move in the next two years, a five-year, fixed-term mortgage probably isn't going to be the right option for you. As such, take the time to identify your needs before you sit down to hash out the mortgage details. You'll be thankful you did when it comes time to make your final financing decision.
2) Get the facts
How much do you know about current interest rates? If you're like most home hunters, the answer is probably not a whole lot. However, if you're serious about locking in at a great rate, you'll want to take the time to do some research. First, look into posted interest rates. Which lenders have the most competitive options? Review the types of mortgage products offered by various lending sources. The more you know, the easier it will be to have a frank discussion concerning your options. What's more, if you know the rate your bank is offering, you'll be able to tell whether or not your mortgage broker is getting you a better deal. If you're struggling to understand your options, consider crunching some numbers using online tools and mortgage calculators. These tools will help you to better understand what you can and can't afford.
3) Be honest
Lying about your current financial situation won't help you get a better mortgage rate. In fact, it can cause you a world of hurt. It's your mortgage broker's job to provide you with the best mortgage products suited to your personal situation. As such, he or she will need you to provide them with truthful information concerning your financial struggles. If you're stretching to make your monthly mortgage payments or you're worried about increasing interest rates, be open and honest with your broker. The more they know, the easier it will be for them to find the right financing option for you.
4) Give yourself credit
When was the last time you checked your credit score? Credit is a critical factor in determining your mortgage rate and product eligibility. As such, it's important that you keep a close eye on your debt. If your credit rating is high, keep it up. If it's not so good, contact your mortgage broker for advice and strategies to improve your score. This could include making regular, on-time payments on your credit cards, or creating a plan to pay down your existing debt.
5) It's not just about the interest rate
Scoring a low interest rate is important when hunting for a mortgage. However, your rate is just one piece in a complex puzzle. Other features, such as payback terms, lump-sum payment options, and penalties, should also be considered during the negotiation process.
"Having the lowest rate can come at a high cost, like a lack of flexibility or high penalties," explains Robb Nelson, CEO of FamilyLending.ca. Opting for a higher interest rate with better mortgage options could actually end up saving you thousands of dollars in the long run by enabling you to make extra payments and pay down your debt faster.
Don't just assume that your bank has the best rate. When it comes to negotiating a competitive rate, it pays to look at all the options before settling on a financing solution. Mortgage brokers are connected to an extensive network of traditional and private lenders, all of whom are competing for your business. A good broker will review the available sources and present you with options that are tailored to your unique needs. You will then be informed and armed to make a financially sound decision.
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Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial or legal strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances, as well as fully aware of current laws and regulations.