Five things you need to negotiate when contracting your home loan

Written by Posted On Thursday, 18 July 2019 07:42

Everyone wants to get housing credit as cheaply as possible, but this is impossible without getting ready. Below we have listed five things you need to focus on.

The rate

It's no secret that you have a lot of room for negotiation when you take out a housing loan. Almost everyone negotiates the interest rate and many people limit themselves to this factor. Yet this is just one of the many things you can negotiate. Below you will find an overview.

Of course, the interest rate is the most obvious topic of negotiation. At this level, you can realize considerable savings. Even a difference of just 0.1% will already save you a lot. Take the example of a credit of 150,000 dollars with a duration of 20 years. According to an interest rate of 1.9%, you will pay a total of 180,141 dollars to the bank. An interest rate of 1.8% will already save you 1,660 dollars, however. Try to reduce the interest rate as much as possible in order to save thousands of dollars.

The duration

The duration of the credit is a double-edged sword. The shorter the duration, the less interest you have to pay. On the other hand, the amount of the monthly repayment will be higher because you will have to repay the borrowed amount over a shorter period.

Try to get a longer term from the bank if the monthly repayment amount does not suit you. An example: you borrow 300,000 dollars at the rate of 2%. Over a period of 20 years, you will pay 1,515 dollars to the bank every month; over a period of 25 years, you will only pay 1,269 dollars, however.

Attention: in the latter case, you will have finally paid 17.057 dollars of additional interest. Also take into account the fact that, in principle, banks offer lower rates for shorter periods.

The mandate

Banks will require you to take out a mortgage to protect against the risk of non-payment. This is the guarantee in case you cannot repay the credit. But it is not always necessary to take a mortgage for the entire amount of credit.

Try to convince the bank to get a mortgage mandate for as much money as possible. Indeed, unlike a mortgage registration, with such a mandate, you will not pay mortgage and registration fees. This will allow you to save considerably.

However, you must ensure that the amount of your mortgage is sufficient to take full advantage of the tax benefit related to the housing bonus.

The insurance

In most cases, when the banks give you their "floor rate", they will require you to buy fire insurance and outstanding balance insurance from them. If you do not pay attention, you will get costly insurance that neutralizes the reduced rate advantage. Recently, a survey conducted by va loan san diego showed that the policies offered via the bank are significantly more expensive than the most advantageous offer on the market. In some cases, the additional price to pay for the insurance is even greater than the credit reduction benefit.

Do not take these extra products too lightly. Compare first the rates of fire insurance and insurance balance remaining due from other banks. Thus, you will quickly know if the insurance offered is too expensive. Based on this information, you can negotiate more advantageous insurance rates. You can also try to contract the credit without the obligation related to these additional products in insurance.

Application fee

For administrative processing, banks charge a handling fee when you take out a loan. These can vary considerably from one bank to another. The differences can easily rise to 200 - 500 dollars. In recently, 500 dollars is also the legal maximum that banks can charge for this purpose. Often, the fees are still negotiable. Ask the bank to drop them or at least reduce them.

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