Learn if you can negotiate mortgage rates and how to do it successfully. Read on for expert advice to secure the best deal on your mortgage.
You can negotiate to get a competitive insurance rate or a car loan interest rate, but can you also negotiate a lower interest rate on a mortgage? The answer is not just yes and not even just a resounding yes. Rather, negotiating may be the only surefire way to improve upon your current mortgage rate. But before you go into a lender’s office ready to broker a deal, you’ll need to know precisely what mortgage rate negotiation entails.
Learning the skill of mortgage rate negotiation may prompt even more questions, like “Can you refinance a fixed rate mortgage?”. Keep reading for everything you need to know about negotiating the best mortgage rates and more.
While negotiating your mortgage rate is possible, only some homeowners actually take advantage of this money-saving strategy. In fact, as of a recent survey, only 39 percent of American homeowners have reported negotiating their mortgage rate.1 This may be because negotiating a rate with a mortgage lender is a bigger challenge than talking a seller down to a lower sale price. Therefore, effective mortgage rate negotiation will require you to prove your creditworthiness.
As you approach this process, it's important to remain confident and remember that mortgage lenders are competing for your business—not the other way around. By clearly understanding how mortgage rates are determined and what lenders look for in a borrower, you give yourself the best odds of negotiating a lower mortgage rate. As we’ll discuss, learning the skill of negotiation can help you navigate how to lower your monthly mortgage payment.
You can think of mortgage rate negotiation as negotiating a lower interest rate for your car –– just on a much larger scale. Despite the fundamental similarities between the two, however, the value of a home loan means there are more variables at play. Make sure you understand these key factors and the impact they can have on the mortgage rate offered to you.
Knowing the factors that influence mortgage rates is only one piece of the puzzle –– how you deploy these different factors as part of your negotiation strategy will make the most impact.
Unless you’re buying a home entirely with cash, your credit score will be one of the single most important determining factors when it comes to getting the best mortgage rate.4 By the same token, improving your credit score is one of the best ways to tip the negotiating scales in your favor.
The process of raising your credit score begins with knowing your current score and understanding the factors propping it up (or dragging it down). Credit reports are often available for free, and you should take the time to review yours while looking for inaccuracies, errors, or potential fraud indicators. Once you’ve pinpointed the problem areas holding you back, make a rehabilitation plan –– whether that means paying all your bills on time, eliminating your debts, or reducing your existing lines of credit by consolidating debts.
Elevating your credit score isn’t an overnight job. Rather, it will take months, maybe even a year (or more) to arrive at a score with serious negotiating power. Give yourself plenty of time and work diligently toward your desired score to best prepare for your mortgage rate negotiation.
Like building your credit score, gathering a large down payment can dramatically improve your negotiating position. Also, like raising your credit, the process of saving up 20 or 30 percent of the purchase price of a home can be a lengthy one. A down payment of 20 percent or more both shows lenders that you are financially responsible and circumvents the need for private mortgage insurance (PMI), which can add hundreds to your monthly expenses.5 This means that, with the right down payment, you can enjoy dual savings: potentially thousands less in interest payments and just as much in monthly payments for PMI.
Depending on your financial situation, saving for a larger down payment will either be a short- or long-term goal.
Whether this is your first real estate rodeo or you’re a seasoned homebuyer, the process can range from tedious to downright confusing. For this reason, it’s important that you prepare for mortgage rate negotiation by learning as much as you can about current rates, local real estate trends, and the factors that determine mortgage rates that we mentioned above. Like going to a mechanic or a car dealership, knowledge is both your greatest weapon and your strongest defense.
You’ve done the work and conducted your research, ensuring you’re as prepared as possible to negotiate your mortgage rate. Here are some tried-and-true negotiating tactics for when you’re ready to broker the best deal:
Waiting for the best mortgage rate can be a gamble. As the Kenny Rogers song goes, “You’ve got to know when to hold ‘em, know when to fold ‘em, and know when to walk away.” When it comes to mortgage interest rates, there’s a time for negotiating –– and there’s a time to accept the best deal and lock in your rate. A mortgage rate lock allows you to pin down an interest rate, protecting you from market fluctuations that can drive rates up. But just as locking in can protect you from unfavorable shifts, it can prevent you from potentially getting a better deal if rates go in the opposite direction.6
For this reason, choosing when to lock in your mortgage interest rate is a critical decision. Your best bet in locking in at the right time will be to monitor market conditions closely. If rates look like they’re on a downward slope, you may want to hold off on locking in your rate. But if economic indicators show rates on the rise, your best bet may be to lock in your rate. After all, even a quarter of a percentage point can equal tens of thousands in the long run.
Whether you choose to lock in at the current rates or wait for rates to drop, proper timing is one of the best strategies out there to improve your mortgage payment. With time, you can devote the necessary energy to improving your credit score. You can craft a comprehensive budget to save for a sizable down payment. And you can conduct all the research needed to go into your negotiations both informed and prepared. If you’re an existing homeowner shopping for mortgage rates on your next property, Truehold can give you all the time you need.
Truehold’s sale-leaseback differs from a traditional sale in that, rather than selling your house and immediately moving into a new one, you can continue living in the home as a renter. This means you have your hard-earned home equity from the sale, along with the flexibility to shop, save, and strategize ways of becoming a master negotiator. This approach won’t be right for everyone. But for many homeowners in Ohio, Missouri, Kentucky, Oklahoma, Indiana, Pennsylvania, and now Texas, Truehold’s sale-leaseback has made all the difference.
So, if you’re wondering how to pay off your mortgage faster or get rid of it altogether, connect with a Truehold advisor and get a cash offer on your home within 48 hours.
In summation: Yes, you can negotiate a better mortgage rate, but doing so effectively requires preparation, patience, and persistence. Armed with the above information and Truehold’s sale-leaseback, however, you give yourself the greatest odds at securing the best mortgage rate and saving potentially tens of thousands of dollars over the course of your loan.
Visit our resource library for more resources dedicated to helping Americans navigate the home-buying process –– and to see the difference Truehold has made in many homeowners’ lives.
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