Yes, you can negotiate mortgage rates
Quick insights
- You can negotiate mortgage rates, especially if you have a strong credit profile and shop around.
- Your credit score, income, debt-to-income ratio and down payment amount all affect how much leverage you have when negotiating with a lender.
- You can also negotiate fees such as origination charges or discount points to reduce your total loan costs.
If you’re shopping around for a mortgage—whether to buy a new home or refinance an existing loan—you may be wondering, can you negotiate your mortgage rate? The answer is yes, but to a certain degree. While mortgage rates are usually influenced by broader market forces like the Federal Reserve, bond markets and inflation rates, loan providers still have some flexibility, especially when they want your business. Your financial profile, including your down payment amount, along with timing and comparing various loan offers, can all strengthen your negotiating power.
When to negotiate mortgage rates
Timing plays a vital role in mortgage rate negotiation. Whether you’re purchasing a new home or refinancing an existing mortgage, there are certain situations where you could have more leverage to negotiate better terms. Here are a few opportunities where you may have the upper hand during the negotiation process:
- When getting a new mortgage: After applying with multiple mortgage providers and receiving loan estimates or preapproval letters, you can use these competing offers to negotiate for a better rate.
- When refinancing your mortgage: If your current mortgage term is ending, you may have a chance to take out a new one to continue paying off your home loan.
- When rates are dropping or volatile: Loan providers may be more flexible in a competitive or uncertain market.
- Before rate lock: Once you lock in an interest rate, your ability to negotiate a mortgage rate drops substantially.
- If you’re a strong borrower: High credit scores, low debt and large down payments make you a valuable customer. This means that mortgage lenders may lower your rate to win your business.
How to negotiate a better mortgage rate
While mortgage rates are largely influenced by broad market conditions (including economic growth, inflation rate and Federal Reserve policy), loan providers often have some flexibility, especially when they want to win you as a new customer. Negotiating doesn’t always mean haggling; it usually comes down to being prepared, comparing offers and asking the right questions. Here are a few tips to improve your chances of securing a better rate:
- Shop around: Gather quotes from at least 3-5 loan providers to see how rates and fees compare.
- Leverage competing offers: Show one mortgage lender another’s lower rate and ask if they can match or beat it.
- Ask about discount points: Paying mortgage discount points upfront will lower your interest rate and save you money in the long run, if it fits your budget.
- Request fee reductions: Even if the rate is firm, some loan providers may lower or waive certain fees, improving your overall loan cost.
- Highlight your financial strengths: Mortgage lenders generally reserve their most competitive rates for borrowers with strong financial profiles. If you have a high credit score, stable income, low debt-to-income ratio or a large down payment, make sure to point that out to the lender. It demonstrates that you’re a low-risk borrower and could make you eligible for better terms.
- Understand the full loan offer: A lower interest rate doesn’t always mean a better deal. Some loan providers may offer lower rates but charge higher fees elsewhere. Make sure you understand the full picture, including the APR (annual percentage rate), which factors in both the rate and associated costs.
In summary
While you can’t control market-driven mortgage rates, you may have some influence on the rate you’re offered. A strong financial profile and taking the time to compare loan offers are great tools for negotiating mortgage rates.
As part of your due diligence, you should see what kind of wiggle room exists when it comes to discussing mortgage rates with your Home Lending Advisor. This means asking mortgage lenders to reduce or eliminate certain fees or request a rate match that could save you thousands of dollars over the life of your loan. If rates change after you’ve locked in your mortgage, refinancing may be an option to consider down the road to take advantage of better loan terms.
