Whether you are buying your first home or even if it’s your fifth house, you will now have to approach a lending institution and get that first mortgage. One of the crucial pieces of information that first time home buyers must be clear on is how much debt threshold they are able to comfortably handle with a mortgage and the accompanying costs of insurance and fees involved.
Now that you have found your perfect home, you will want to negotiate the best possible mortgage terms possible. This is especially important as many experts are anticipating that in the not so distance future, interest rates will be on the rise.
There are two basic areas that you might want to focus on as you consider obtaining the best possible mortgage because even a small difference in the interest rate or terms of the mortgage can save you thousands of dollars.
One of the biggest discrepancies between the large banks and smaller mortgage lenders revolves around interest rates. The larger institutions tend to post the highest rates possible while smaller sized lenders may or may not be posting their lowest rates possible.
Many experts suggest that the best approach, if you are going through the big banks is to apply for a pre-approval of their mortgage, or at least try to get an interest rate guarantee. Many banks have as much as a 1.5% latitude on the interest rate from what they post and what they might actually give so this is one area you want to try and negotiate. Be aware that if you don’t already bank with that particular institution, you probably won’t have much luck as they tend to be more compliant with existing customers. So, never be shy in asking for the best rate possible.
If you don’t have any accounts with that bank, you can sweeten the pot by offering to transfer your accounts and RRSP’s to them in exchange for a preferred rate.
Another factor that you can dicker in convincing the bank to give you better consideration is to up the amount of down payment. Say for example that you can afford a 25% down payment, then start by offering 20% or a bit more and if the bank baulks at giving you a preferred rate, then sweeten the post and say that you will up the down payment to 25%. The more you can put down towards the home, the more comfortable the bank will be in approving your loan.
Communication skills, the quality of your loan paperwork, and appearance are also vital components in achieving a successful negotiation. Dressing in jeans with stubble on your face isn’t going to create a positive impression so get cleaned up and look professional and presentable. These just aren’t bankers, they are also people. Your tone and attitude are also important. Getting aggressive, raising your voice or threatening you will withdraw all your accounts won’t help your cause.
Have your paperwork completed neatly and ensure that it is presentable. Show them that you have done your homework before you sit down to talk.
Many people now use the services of a mortgage broker to get the best mortgage deals. They can offer a lot of useful advice and guide you through the process to make your first mortgage application a much smoother process.
Photo by Diana Parkhouse
