Negotiate Your Mortgage

Many people refinance their debt by getting a debt consolidation loan or by refinancing their existing mortgage.

Did you know that most of the terms of your mortgage can be negotiated between you and your lending institution? Learn more about mortgages...

Lending institutions are in the business of lending money to make money.

• It is up to you to negotiate the terms that are in your best interest, the lending institutions are not looking out for your best interest they are looking out for their own interests.
• Lenders interests are to make money, as much money as they possibly can, that is what being in business is all about. 
• The lending institutions make money from interest, fees, penalties, etc. and all of these terms are in your mortgage agreement if you look closely for them.

These are some of the things you need to determine when looking to negotiate your mortgage:

• Down payment (range between 5% and upwards of 25%)
• Amortization period (usually 20-25 years)
• Term of the mortgage (can be months to years) Fixed and Variable Interest Rates
• Open or Closed mortgage ("extras" of mortgage decided by this feature)
• Monthly, bi-weekly, or weekly payment options
• Interest rate (can range from prime+ upwards of 1/2-5% depending)
• Penalties and fees to be charged by the lending institution (if you change any of the terms of the mortgage such as paying it off early)
• Prepayment options: increase regular payments, up to 20% in annual lump sum payments, doubling up on payments are some of the choices offered by lending institutions.
• Mortgage insurance or term insurance
• Portability and assumability options
• Legal fees to purchase property, register title, register mortgage against property

Many of the above factors will determine how much negotiating room you'll have when negotiating the terms of your mortgage.

• Many Canadians negotiate the best mortgage that they can with one lending institution and then take these terms to a different lending institution to see if they can negotiate an even better deal with the new institution.
• Many times they are successful because the lending institution wants the new business.

Several people do not know that you can or should negotiate the terms offered by the lending institution. Many people think they have to take whatever terms are offered.

Negotiating Points:

• Savings - if you have savings and are able to cover the initial 10% downpayment you won't need to borrow an additional amount to come up with the 10% that is needed to buy a house.
• CMHC  - if you're able to put a 25% downpayment when you buy your home you won't need to be insured by CMHC (Canadian Mortgage and Housing Corporation) which makes your mortgage less expensive because you won't have the additional costs of this insurance.
• Term of mortgage - can be fixed, variable or combination. This is referring to the interest rates over the length of time of your mortgage. Some people choose one, three, or five year terms. If the interest rate is fixed it stays the same for the term. Which means its locked in over the term of the mortgage. If you choose variable, the interest rate changes over the term of the mortgage as per the conditions in your agreement.
• Open or Closed - this feature deals with what you are able to do over the term of your mortgage when it comes to making additional payments, paying down lump sums, etc.  A fully open mortgage allows you to make additional payments on a regular basis, pay down lump sums basically whenever you want to. Other mortgages allow only a percentage of outstanding balance to be paid on the anniversary of the mortgage, maybe on an annual basis. Which means you may be able to make a lump sum payment of anywhere from 10-20% on the anniversary date( depending on the terms of your mortgage) 
• Interest rates are extremely negotiable, you may be able to negotiate a better rate if you have other products with your lending institution that they are already making money from. These can be investment products, other loans, savings, mortgages, business account, etc. Try to negotiate the best rate possible as they significantly affect what your monthly mortgage payment will be.
• Choose the repayment period from the choices of weekly, biweekly, or monthly. You might think what difference does it make how I choose to repay my mortgage? The choice of repayment period can save you thousands of dollars over the life of a mortgage. When you choose to pay mortgage payments weekly or biweekly you will actually make an extra monthly payment over the course of a year. In a monthly contract you make 12 payments per year where the other choices add up to 13 payments for the year. These addtional payments in the early years of a mortgage pay off big time down the road as you will see if you choose to access the mortgage calculator and try a few different repayment scenarios.

How Long Will it Take to Pay Off the Mortgage?

Have you wondered how to figure out how long it will take to pay off your mortgage?

The following tool is available if you have Microsoft Excel.You can calculate different scenario's by clicking the link to the Mortgage Loan payments calculator.

If you do not have Microsoft Excel you can go to www.bankrate.com or www.fcac-acfc.gc.ca to access mortgage calculators and determine how long it will take you to pay off your mortgage. Also, learn what the interest costs will be over the term of your mortgage. Calculate how much interest you can save by making annual lump sum payments.

Happy House Hunting and Mortgage Shopping!