Lower interest rates on a mortgage can save you significant amounts of money over the
repayment term. Most lenders advertise mortgage rates, but few borrowers know they can get
lower rates if they negotiate.
There are several other things you can negotiate for in a mortgage besides interest rates. These
include cash-back benefits and prepayment options. Negotiation is one of the most effective
strategies for saving money on a mortgage. Whether you’re a seasoned or a first-time borrower,
you must prepare and plan well for mortgage negotiation.
Here’s how to go about negotiating for lower loan rates.
Get Multiple Mortgage Quotes
Mortgage fees and interest rates vary from one lender to another. Some fees are negotiable, and
getting a waiver or reduction on them can lower your monthly installments significantly. Getting
multiple quotes and comparing offers from different lenders before applying for a loan gives you
a good start.
Consider getting at least three loan estimates from lenders and review them. Once you identify a
preferred lender, call the bank and inform them of your lower quotes. This way, you put lenders
against each other and have the upper hand in negotiating for the best rates.
Check out lender websites and consider getting quotes from different kinds of lenders.
Alternatively, you can use mortgage apps to gather and compare multiple quotes. Some lenders
may be more ideal for specific borrowers than others. Get one quote from your bank, another
from a local credit union, and a third from a more prominent lender. Online lenders offer lower
rates than brick-and-mortar banks due to low overheads.
Lower Your Debt-to-Income Ratio
Besides credit score, most lenders consider borrowers’ debt-to-income ratio when making
mortgage decisions. Improving both before you submit your mortgage application increase your
chances of negotiating for lower interest rates successfully.
The debt-to-income ratio shows the percentage of monthly income that goes to debt repayment.
To calculate it, divide your debt payments by your monthly gross income. Since lenders tend to
favor borrowers with a low debt-to-income ratio, keeping yours at the minimum can give you an
edge during interest rate negotiations.
One practical way to lower the debt-to-income ratio is to pay your debts entirely or reduce them.
Alternatively, you can explore new ways of increasing your monthly income. For instance, you
can get a second job or set up a side hustle to raise extra income.
Know When To Negotiate
Knowing when to negotiate a lower rate for your mortgage is equally essential. You can
negotiate your mortgage at three varying times—when applying for a new mortgage, renewing a
mortgage, or during the current mortgage. Even so, you can get a lower rate if you negotiate
when applying for a new mortgage.
At this time, multiple lenders want to get your business. Take advantage of the situation to see
whether your preferred lender would be ready to outdo the competition. You also can negotiate a
lower rate better after the current lender sends a mortgage renewal letter.
When that happens, look at what other lenders offer and use that to negotiate a better rate. If
interest rates drop during a mortgage term, consider refinancing your loan. This way, you can
renegotiate a better rate. However, you need to check what prepayment fees would be applicable.
Know the Mortgage Amount You Qualify For
When negotiating mortgage rates, you should know the amount you’re qualified to borrow based
on your credit score and current financial situation. Essentially, these are the two factors that
lenders use to determine interest rates offered to customers. As a general rule of thumb,
borrowers that demonstrate credit scores and financial strength enjoy low rates and easily qualify
If unsure about the maximum mortgage amount you can borrow, take time to learn more about it
before approaching a lender. Getting pre-approved for a home loan is an excellent way of
knowing how much you can borrow.
Request For Discount
Financial institutions publish interest rates and use them to determine prepayment penalties
should borrowers break their mortgages. Occasionally, uninformed borrowers accept those rates.
Although mortgage lenders advertise their interest rates, they can give discounts to borrowers
with a solid application and those who request a discount.
Interest rate discounts vary from one lender to another depending on their profit objectives and
prevailing market conditions. You may also request discounts or waivers on other charges like
application and origination fees, for which lenders have wiggle room.
Work With A Mortgage Broker
If you’re squeezed for time to shop for lenders and negotiate for lower rates, you can hire the
services of a mortgage broker. Mortgage brokers are not attached to a specific lender. This
allows them to engage different lenders and get the lowest rates in the market.
Mortgage brokers are also better placed to help applicants in unique situations like the self-
Keep Tabs On Interest Rates
You need to monitor changes in interest rates to negotiate better mortgage terms. Tracking
interest rates allows you to know when they drop and renegotiate rates in-between current rates.
If you have a variable home loan and interest rates go up, the lender can allow you to change a
fixed rate, enabling you to save cash on your mortgage.
The majority of homeowners rely on mortgage financing to acquire homes. However, high-
interest rates can make home loans costly in the long run. Negotiating for lower rates can save
you significant amounts in monthly repayment installments. But negotiating interest rates isn’t as
easy as it sounds.
The process requires proper planning and preparation to identify aspects like solid credit scores
and a low debt-to-income ratio that can give you an edge as a borrower. If you plan on getting a
new mortgage, renewing, or refinancing an existing one, applying the seven tips above can give
you better success chance.