5.3.3 Video: Negotiating your mortgage
- 5.3.1 Where to get a mortgage
- 5.3.2 Getting the best deal
- 5.3.3 Video: Negotiating your mortgage
- 5.3.4 Mortgage rights and responsibilities
- 5.3.5 Renewing and renegotiating your mortgage
- 5.3.6 Borrowing on home equity
- 5.3.7 Should you put debt on a mortgage?
- 5.3.8 Mortgage fraud
- 5.3.9 Signs of fraud
- 5.3.10 Protect yourself
- 5.3.11 Summary of key messages
Did you know it's possible to save tens of thousands of dollars with just a few hours work? It's not as crazy as it sounds. When it comes to mortgages, educating yourself about the process and the power of negotiation can help you become both a savvy and confident customer.
Segment 2: Don't be nervous
Before you start, remember that lending institutions are actually competing for your business and not the other way around. They want to lend you money because that is how they make money.
To get your business they will be willing to offer terms that are more attractive than those of their competitors.
Segment 3: The benefit to you
And the benefits to an active negotiator can be astonishing.
For example, on a $200,000, 25-year mortgage, the difference between a 5% interest rate and a 4.5% interest rate could add up to a savings of nearly $17,000.
$200,000 mortgage for 25 years
5% interest - $148,963
4.5% interest - $132,083
= Saving $16,880
Segment 4 - How to do it
Let's take a look at how you can make this happen:
1) First, carefully analyze your own finances so you know what you can afford. Then prepare yourself using the Mortgage Calculator Tool at the FCAC website: (www.fcac.gc.ca)
Calculate different payment and interest options. This knowledge will help you figure out what your bottom line is, and what options are most important to you.
2) Then, interview several lenders to get information about what each one offers. Tell them that you want to have your mortgage pre-approved before you make an offer on the home that you want to buy. This demonstrates that you know what you are doing.
3) Don't take the first offer that a lender gives you, try negotiating first. See if competing lenders will match their opponent's terms, or offer better ones.
4) Decide which offer, and which combination of features, works best for your circumstances.
5) Lending institutions are often willing to negotiate a wide range of mortgage terms. Two of the most important ones are:
5a) Interest rates can vary widely, typically ranging from the "prime" rate plus from half of one percent to over five percent. The prime rate is the rate lenders charge their best customers.
5b) The Amortization period also has a major impact on your mortgage payments and the interest that you pay over the life of the mortgage.
And there are many more negotiable items.
Segment 5: Mortgage broker
One alternative to negotiating directly is to have a mortgage broker negotiate for you. They are paid a finder's fee by the lender. If that sounds like something you'd be interested in, interview more than one broker to find one who meets your needs best. Some brokers only work with a few lenders.
Your strongest negotiating tools are knowledge and competition. Interview several lenders and compare their offers. Take the offer that works best for you. You could save thousands of dollars over the life of your mortgage!
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