Everyone loves a good deal. And while most Canadians are confident haggling over the purchase price for a home, they seem to overlook negotiating their mortgage rate.
Whether you're just starting the process of applying for your first mortgage or well into the paperwork for your fourth, taking care of your financial health can help you acquire the mortgage you need at a rate you want.
Good Credit Rating
Along with your income level and how much debt you're carrying from month to month, mortgage lenders will look to your credit history when it comes to determining eligibility. Late or missed payments, spending above a credit card's limit, or filing for bankruptcy can all negatively impact your credit rating, and in turn, reduce your chances of securing mortgage approval.
If your credit history is a little iffy, you might want to consider a down payment that is more than the minimum. This helps lenders view you in a more favourable light. If you're purchasing your first home, just putting down five percent can be tempting, but a more substantial down payment can not only help you secure mortgage approval, it can reduce the amount of mortgage you need. A smaller mortgage means more money in your bank account, fewer interest payments, and it can motivate lenders to offer lower interest rates.
Discretionary versus Advertised Rates
When it comes to mortgage rates, there are frequently more options available than at first glance.
The rates a bank promotes on their website or in their lobby are 'advertised' rates; these aren't the same as Discretionary rates.
Sometimes called 'hidden' or 'discounted' rates, discretionary rates are those lower amounts a bank or lender can implement at their choosing - or discretion. These are often available to potential borrowers with strong credit ratings who are making an above-minimum down payment.
Before you start discussing lending rates, spend a little time comparing Canadian mortgage rates. Once you have this information, it's time to talk to a lender and start negotiating. Ask what the lowest they can offer is and start working from there.
If a rate is higher than you'd like to pay, let them know. Offer your research as an incentive for a lower offer. If they are unable or unwilling to budge, you may need to look elsewhere. Alternatively, they may offer different features that offset the higher price.
Whether you opt for the cheapest rate or decide additional terms or perks make paying a little more worthwhile, choose the best mortgage for your situation.
Now that you've mastered the art of negotiation, don't forget to compare home insurance quotes (often a requirement for getting a mortgage) as well, to put you in the best possible position.
Negotiation is not always easy, but it can mean significant savings. And remember, sometimes, to get the best deal, all you have to is ask for it.