Negotiating your mortgage can help you save big

How are your negotiating skills? Do you enjoy a little bartering when you’re on vacation but recoil at the thought of trying to get a deal from your banker?

If you’re in the market for a new home or your existing mortgage is up for renewal, paying attention to the interest rate can cost or save you thousands of dollars. According to a survey by Manulife, nearly two thirds of Canadians didn’t negotiate their mortgage when they renewed it. And you’re even less likely to ask if you’re a new buyer because there’s so much emotion tied up in the purchase.

Whom can you turn to?

Considering the recent mortgage qualification changes, it’s more important than ever to seek the advice of a professional before you make a financing decision for your property.

“Mortgage brokers are specialists in home financing,” says Paul Taylor, president and CEO, Mortgage Professionals Canada. “Brokers scan the marketplace, looking for the product that is the best fit for your personal situation. The lowest interest rates are generally available through a mortgage broker; however, the best fit is not always the lowest rate. Cancellation penalties, portability and refinancing flexibility are additional factors to consider. Paying a slightly higher rate may save you thousands of dollars in the long run.”

Where should you start?

Consider working with a Certified Financial Planner (CFP). “People working with CFPs are more confident in their goals and have a better understanding of what is affecting them not just now, but also in the future,” says Shawn Todd, certified financial planner with ECIVDA Financial Planning Boutique. “Turning to a broker (once you have a financial plan in place) to help with getting a great rate can make a huge difference in your mortgage planning. The last time my wife and I negotiated a mortgage, we utilized an excellent broker and they were able to get a rate that the banks could not offer.”

How much of a difference can asking make?

Whether you use a broker or do the negotiating yourself, you could save big bucks over the life of your mortgage. Let’s use a simple calculation of a $400,000 mortgage with a 25-year amortization and a five-year fixed rate at 3.74 per cent (versus 3.24, both paid monthly). Getting just a half percentage point reduction could save you nearly $40,000 over the life of your mortgage. However, switching from monthly payments to accelerated weekly payments and making extra payments towards your mortgage principal can burn years off your mortgage, too.

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