By Lacy Gallagher on August 12, 2011
.jpg.aspx?width=75&height=75) Mortgage interest rates are not a fixed number; they are practically always negotiable.
The Federal Reserve announced unprecedentedly on Tuesday, August 9, 2011 that the low interest rates are here until at least mid-2013. These historically low interest rates make this time period an opportune time to renegotiate rates on loans.
Refinancing terms are always negotiable. “Shopping, comparing and negotiating may save you thousands of dollars,” the Federal Reserve states on their website.
Successful Negotiation Procedure:
- Gather information from as many lenders as possible. The more options that you have available, the better chance of finding the lowest possible rate.
- Collect all the necessary financial information.
Rates: Determine whether it is fixed or adjustable. Fixed rates have a set repayment term (typically 15, 20 or 30 years) and the rate and monthly payment stay the same over the time period. Adjustable rates fluctuate based on the market conditions, but the agreement has a minimum and maximum rate. Monthly payments rise and fall with the interest rate. Adjustable rates are typically more expensive monthly and the interest rates are higher.
Points: Fees paid to the lender linked to the interest rate; the more points you pay the lender, the lower the rate. You can discuss with the lender the dollar amount equivalent to the points to ensure that the price is not a surprise.
Fees: Every lender should be able to give you an estimate of their fees as well as explain every fee included.
- Negotiate to obtain the best possible deal. Different terms are offered to different customers, often to people with same qualifications seeking the same loan terms. Simply ask the lender if it is possible to lower the fees, rate or points, but ensure they do not lower one while raising another. There is no harm in enquiring about a better deal than the lender’s original offer or one found elsewhere.
Do not instantly assume that credit problems limit your renegotiating terms to only high-cost lenders and high interest rates. Ask how your credit history affects the estimate of the negotiation and what steps you could take to have the negotiation chip. If you are able to give a reasonable explanation for mishaps on your credit report and able to provide reasons why you can be trusted to repay the loan, it is possible that the lender will work with you to reach a win-win agreement. Shopping around and comparing are the keys to renegotiating a mortgage.
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