Mortgage Q&A: “Are mortgage rates negotiable?”
In short, mortgage rates are indeed negotiable, like many other costs involved in obtaining a mortgage, such as the loan origination fee.
However, like anything else you shop for, you may be told that prices/rates are firm.
This isn’t the case, as mortgage rates can always be adjusted up or down in a variety of different ways.
For example, you can buy down your interest rate by paying mortgage discount points.
This isn’t pure “negotiation” because you’re actually paying prepaid interest upfront to lower costs for the loan duration, but it does tell us mortgage rates can be adjusted.
The opposite is also true – like in the case of a no cost refinance, where you pay nothing out of pocket, but take on a higher mortgage rate to compensate the originator for that lack of costs.
Ask for Multiple Mortgage Rate Quotes
But a more pure form of negotiation involves adjusting costs and the associated mortgage rate by asking for multiple rate/cost combinations.
So if the loan officer or mortgage broker offers you a rate of 4.75% on a 30-year fixed with $2,500 in closing costs, you can ask for other options.
What would the mortgage rate be with no closing costs, or just $1,000 in closing costs? What if you paid $5,000 in closing costs?
After getting all those quotes, you can shop around and come back and ask for 4.50% with no closing costs, using another bank or broker’s offer as leverage.
There’s a good chance you’re not getting the rock-bottom rate the first time around, so why just accept it as the best offer?
Use Competition to Your Advantage
The mortgage industry is a very competitive space, so mortgage lenders and their representatives will always be willing to work with you to snag your business.
They may make a little less in the way of commission, but still enough to want to close your loan.
Don’t believe it when they tell you they’re “just breaking even” or “not making enough” to do the deal. This is simply their justification to make more money while you pay more. In the end, they need your business more than you need theirs, so remember that during negotiations.
Get mortgage rate quotes online, visit local banks, and speak to a few mortgage brokers. It’s a big deal to get a mortgage, so why stop at just one or two quotes?
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