Tips to Negotiate a Lower Interest Rate on Your Existing Mortgage
The recent drop in loan interest rates to 5% and even lower, prompted many borrowers to have their loans refinanced to take advantage of the low offer. However, not everyone is eligible since there are certain requirements to meet in order to qualify for the low-interest rate on home loans. Nevertheless, there are other options available on how to bring down the interest rate on one’s mortgage loan.
Here are some useful pointers:
1. Ask the present lender about their own recommendations on a refinancing loan and how it can reduce a borrower’s interest rate. If an individual gets turned down, that person should look for other lending companies on the Internet as well as in newspapers. They may not offer loan interest rates as low as 5%, but any reduction of rate compared against the current, can go a long way in reducing one’s financial burdens.
However, be wary of additional or hidden charges. As much as possible, choose a lender that can provide a written quote of the refinancing costs, guaranteed to stay unchanged until the loan has been approved.
2. If a borrower is unsuccessful in getting his or her interest lowered, yet he or she has the financial capacity to make a large amount of partial payment for the loan, it would be best for that person to do so. Such action reduces the principal debt on which interest computations are based.
3. Borrowers should also check the current market value of their property. There may have been recent developments that caused the market value of their property to appreciate in the area where their mortgaged property is located. Certain factors such as commercial or business centers, schools, tourist spots or any other development that would attract other people to visit the locality, can boost the market value of a property. Use this as leverage in asking for a lowered rate of interest. Banks also weigh the value of collaterals, since they will benefit from the sale of the property in case they foreclose.
4. Individuals with an assortment of debts should get in touch with a debt consolidating company that will work out a debt consolidation program. The debt consolidating company will seek the creditors’ approval for a lower interest rate and payment terms as well as cessation of penalty charges.
5. If a borrower succeeds in convincing a lender for a reduction of interest rate, it is best to lock it in for at least 30 to 60 days, as one’s protection from possible fluctuation. If the interest rate fluctuates and becomes high, the locked-in interest will prevail. On the other hand, in case of lower interest rates, negotiate for it to prevail.
In all these possible courses of actions on how to lower interest rate on one’s mortgage loan, it is presumed that the borrower has a good credit score or credit history. Lenders often give in to borrowers who have track records of good paying habits. In a more recent turn of events, the federal government has made a pledge to maintain the low rates for two more years.
- Image: Baton Rouge, La., September 16, 2005 - A U.S. Small Business Administration representative goes over the details of homeowner and renter low-interest disaster loans by Win Henderson/ Wikimedia under public domain.
- Fed pledges very low interest rates for 2 years; stocks rally: Washington Post with Bloomberg –http://www.washingtonpost.com/business/economy/fed-pledges-very-low-interest-rates-for-2-years/2011/08/09/gIQA5c7z4I_story.html