How to negotiate your mortgage?

It's well-known: to get the best mortgage deal, you must negotiate! But you still need to know how to do it right and what aspects of your mortgage to focus on. 

Looking for tips to improve your negotiation skills? Look no further! In this article, we've compiled all the important information you need to know to negotiate your deal with the bank. 

Our top 3 tips for negotiating your mortgage 

Did you know that a simple 1% reduction in your mortgage rate could save you several thousand dollars in interest by the end of your term? That shows how important negotiation is! Adjusting your interest rate, or any other term of your loan, could be of great benefit to you. 

1. Don't accept the first offer 

This is the first piece of advice to remember and without a doubt one of the most important. The first offer you receive will very rarely be the most advantageous. So don't stop your search at that point. 

Is your first instinct to go back to your current lender for your mortgage? Instead of settling for a single choice, shop around for a variety of lenders. 

Contact banks and loaners to compare their offers and the loan terms they are willing to offer you. You can also consult the Internet and their respective websites to get a preliminary idea. Note, however, that you should always try to negotiate down the terms posted online. 

2. Negotiate more than the rate

Of course, you'll want to negotiate to get the best rate possible. However, you should be aware that choosing between a fixed or variable rate can have a big impact on the interest you pay throughout your loan. That's why it's important to understand the differences between them and decide which is best for you. 

But a mortgage is much more than a rate. It would be a mistake to choose your lender based on that alone. Many other features of your loan can and should be negotiated.

The term is the length of time for which your mortgage contract is valid. The most common term in Quebec is 5 years, but it can range from 6 months to 10 years. It must be renewed until you reach your amortization period and pay off your loan. 

The term of your mortgage can have a significant impact on your payments. The shorter the term, the lower the rate, but the greater the risk of a rate increase when you renew your mortgage. On the other hand, a longer term will cost you more but will give you more stability. 

Amortization 

Amortization is the total time over which your mortgage is repaid. Most borrowers choose a 25-year amortization period, but depending on your situation, you may choose a shorter (15 or 20 years) or longer (30 years) amortization period. 

The longer your amortization period, the lower your monthly payments will be. However, you'll accumulate much more interest than with a shorter term. 

Payment Frequency 

You can make your mortgage payments monthly, bi-weekly or weekly. By choosing more frequent payments, you'll pay off your mortgage faster and accumulate less interest. 

Type of loan 

A mortgage can be open or closed. The type you choose will affect your ability to make early payments, as well as the interest rate you pay. A closed mortgage generally has a lower interest rate than an open mortgage. 

3. Work with a mortgage broker 

Don't feel like doing everything yourself? That's perfectly understandable. Researching, comparing and negotiating with banks can be costly in terms of time and effort. Fortunately, it's possible to outsource this task to an expert: the mortgage broker. 

Working with a mortgage broker is undoubtedly one of the best ways to ensure that you get a loan tailored to your situation at the best possible terms. We invite you to learn more about this professional in our article What is the role of a mortgage broker in Quebec? 

How do I renegotiate and renew my mortgage? 

At the end of your mortgage term, you'll undoubtedly need to renew your contract. But while most people know the importance of negotiating at the time of obtaining a loan, many forget that you can also negotiate at the time of renewing your mortgage. In fact, it's recommended that you do! 

So how do you go about renegotiating at this stage? First, by reviewing the changes that have occurred since your contract went into effect. 

• Has your family grown? 

• Have you changed jobs? 

• Have you gained or lost money? 

• Have your life plans changed? 

These are just a few of the questions you can ask yourself to help you become aware of the changes that have occurred and determine if your current loan terms still meet your needs. 

Then, renegotiate your mortgage in advance, at least 3 months before your term expires. Although your lender is required to send you a renewal notice at least 21 days before your term expires, don't wait to receive it before shopping around for your new terms. If you do, you may run out of time. 

Ideally, you should start shopping or contacting your broker 6 months before your term ends. That way, you'll have time to compare several options, just as you would for a new mortgage. 

You are under no obligation to stay with your current lender. If a lender offers you better terms, you may choose to switch to that lender rather than your original bank. However, this change usually comes with additional costs that you'll need to consider. Talk to your new lender: some competitors are willing to pay the cost of having you as a customer. 

Early mortgage renewal: advantageous or not? 

Mortgage rates have fallen since you signed your contract, and you don't want to wait until the end of your term to renew and renegotiate? It's natural to want to take advantage of better terms, but you need to consider the full implications of your decision. 

Some mortgages allow you to renegotiate certain terms before your contract expires. However, in most cases, there is a fee for renegotiating before the end of the term. These fees can be quite expensive, and generally, the further your mortgage matures, the higher the cost. 

Before deciding, check with your lender to find out what the penalty will be if you decide to renew early. The early termination fee could be higher than the savings you're expecting. 

Note that some lenders offer a "blended and extended" option that allows you to extend your mortgage at a lower rate. Your current rate will be combined with the lower rate. Again, you may have to pay certain fees. 

Tips for saving money on your mortgage 

The main reason to negotiate your mortgage is to save money. So here are some additional tips you can use to maximize your savings: 

• Pay off your mortgage over a shorter time. By paying off your mortgage faster, you'll accumulate less interest and end up saving significantly. Of course, you must be able to make larger payments. 

• Keep the same payment even if interest rates drop. By keeping your payment the same when interest rates drop, you'll pay off your mortgage faster. This is an advantageous option in the long run. 

• Round up your payments. For example, if you're paying $987 a month, round up your payments to $1,000. That little extra won't make a big difference in your pocket, but it will save you money on interest. 

• Avoid paying twice for mortgage insurance. Do you have insurance on your mortgage? If you switch lenders and the amount and amortization of your loan don't change, you may be able to avoid paying a new premium. Simply ask your previous lender for your insurance certificate number and present it to your new lender. 

Are you looking for a mortgage broker?

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