You might think it’s impossible to negotiate your interest rate with mortgage lenders but with the right strategies and due diligence, you may have more leverage than you think.

Shop around

In any price negotiation, you need leverage. In the case of a mortgage, you need competing offers. The good news is that getting competing offers is easy. All you’ve got to do is shop around and get rate quotes from additional lenders. Once you have written quotes that are lower than that provided by your preferred lender, you can go back and ask the lender to match or beat the competing offers.

Negotiate using points

Buying down your interest rate with an upfront payment is an easy way to lower your rate and potentially save a lot of money over the life of your loan. How much you want to pay in points will depend on a number of factors, including how much cash you have on hand to pay upfront but also how certain you are that you’ll be keeping the loan for a long time. The longer you keep your loan, the more beneficial it is to negotiate with points.

Offer to put down a larger down payment

Lenders are less likely to negotiate with buyers who are putting down the minimum. In many cases, increasing the amount you put down can lead to a lower rate.

Watch out for APR

It’s important to remember that your interest rate is only one variable that goes into the equation for calculating the total cost of your mortgage. Negotiate your interest rate down as low as you can, but always compare the annual percentage rate (APR) when deciding which lender is offering you the best deal. The APR represents interest payments plus any points you’ll need to pay and all other loan related costs.

Don’t forget closing costs

Once you’ve worked lenders down as low as they’re willing to go, don’t be afraid to push for a discount on closing costs. While some closing costs are fixed, there can be wiggle room if the lender really wants your business. It never hurts to ask.

The mortgage broker advantage

If all this sounds like more than you want to deal with, you should consider working with a mortgage broker who can negotiate on your behalf. Mortgage brokers already have numerous lenders they work with and enjoy added leverage since they’re negotiating multiple loans. A mortgage broker can also help you determine if the lender with the lowest interest rate is your best option.

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