Lenders in the competitive space have rates that are fairly set-in-stone.
There are some options for borrowers looking to negotiate a better mortgage rate. You will not know until you ask the question!
Can I negotiate a lower mortgage rate without refinancing?
The best time to get the lowest rate is when your mortgage contract is coming to the end of its current term. Your current lender will be motivated to keep you as a client – they will not want you to leave.
If your rate is significantly higher than the current competitive rates (i.e., 1% difference) it is worth asking your current lender if there are any options to improve your rate. It is likely that you may be able to negotiate a lower blended rate for the remained of your mortgage contract. This depends on the lenders internal policies and does not apply to all lenders.
How do I get a better interest rate on my mortgage?
The best approach for finding a better interest rate would be to shop around with various lenders to see what special offers are available. A great strategy would be to use the services of mortgage broker. A mortgage broker has access to multiple lenders and is aware of current rates and potential market trends that may negatively affect mortgage rates.
Here are a few factors that will make your mortgage application more attractive to lenders include:
• Make sure you have an excellent credit score. Lending is based on risk – this is an opportunity to prove to a prospective lender that you are a low risk.
• Having a solid work history with income that is supported through documentation will help. This includes copies of current pay stubs, a Letter of Employment, CRA Notice of Assessments and income T-slips.
• Increase your down payment. By having more “skin in the game”, you reduce the risk of the lender not recouping their investment if you default on your mortgage payment and force a Power of Sale.
Does asking for a lower interest rate affect my credit score?
No. Asking for a lower interest rate will not affect your credit score. Your credit score will be affected by authorizing a request to access credit (i.e., loan, credit card, personal line of credit etc.). The act of negotiating for a better rate will not impact your current credit score.
One word of caution. Deeply discounted rates that seem too good to be true may have limitations that will restrict your options to make changes to your mortgage contract before the end of your term. These limitations may, in fact, cost you thousands of dollars. Use a credible mortgage professional to help you with the process.