If you are like most homeowners, then you probably don’t like the idea of paying more than necessary for your mortgage. After all, your mortgage is one of the biggest financial commitments that you’ll ever make.
But the good news is, there are still ways to negotiate a better interest rate and will help you to save thousands of dollars, pay off your home sooner, and reduce financial stress.
Is It Possible to Negotiate My Home Loan Interest Rate?
It is still possible to negotiate your home loan interest rate. However, not all lenders are open when it comes to negotiating. So it’s important to find a lender that is flexible and willing to work with you.
Also remember that lenders might lower your rate if you can prove that you’re a low-risk borrower and financially responsible. This means that you have to show the following:
- A solid credit score
- A steady income
- A history of on-time payments on you
How to Ask My Lender to Lower My Interest Rate
It can be intimidating to ask your lender for a better rate, but it’s easier than you might think. You can just simply call your lender and then make the request. If you’re unsure how to approach it, then you can enlist the help of a mortgage broker since they are experienced when it comes to negotiating with lenders.
Here are five tips to help you prepare for the conversation:
- Be a Responsible Borrower
If you have a good financial habit, lenders are more likely to lower your rate. That’s why you make sure that you stay on top of your loan repayments, maintain a health credit score, and keep your LVR at or below 80%.
Positive factors that improve your negotiating power include:
- Stable employment
- A history of repaying principal and interest on time
- Owning and occupying the property
On the flip side, factors that might hurt your chances include:
- Late or missed payments
- A poor credit history
- A high LVR (over 80%)
- Being self-employed or having irregular income
- Research Your Current Lender’s Interest Rates
Before you start the negotiation, it’s important that you take time to understand the current market situation. For instance, ask yourself what rates are your lender offering new clients? What are other lenders offering? Are there any fees for refinancing or penalties for switching lenders?
Knowing this kind of information will put you in a strong position during negotiations. Moreover, it will also help you to understand your own financial situation, like knowing how much equity you have in your home and what kind of monthly payments you can comfortably afford.
- Shop Around for the Best Deal
Don’t just rely on your current lender, remember that you can also compare offers from other lenders so you can find more competitive rates and use this information to your advantage. You can also mention to your current lender that you’re considering switching if they can’t offer you a better deal.
- Ask About Rates for New Clients
Lenders often offer their most attractive rates to new clients as an incentive to bring in new business. Ask your lender if they can match the rate they’re advertising to new customers.
If your lender hesitates, let them know you’re considering refinancing with another lender. This might encourage them to reconsider and offer you a better deal to keep your business.
- Use Your Customer Loyalty
If you have been their loyal customer for many years, then you have a lot of advantages. So while negotiating, mention your long-standing relationship and positive history of working with them. Remember that lenders often value loyalty and might offer a better rate to retain a reliable client like you.
What If My Lender Won’t Reduce My Interest Rate?
If your lender still refuses to lower your interest rate despite all your efforts to negotiate, don’t give up. There are still other options open for you to explore.
One of the options is to refinance your loan with a different lender that offers a lower rate. Refinancing involves taking out a new loan to pay off your existing one. While there may be some fees associated with refinancing, the long-term savings could outweigh costs.
The Bottom Line
Negotiating a better interest rate can feel like a daunting task, but the potential savings make it worth the effort. By being prepared, doing your research, and demonstrating financial responsibility, you can increase your chances of success.
If you’re not comfortable negotiating on your own, don’t hesitate to reach out to a mortgage broker for help. With the right strategy, you could secure a lower rate and save thousands over the life of your loan.
