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August 2011 - Mortgage interest rates are negotiable.

Mortgage interest rates are negotiable.

☳ by Adam Aspilla

Paying off your mortgage by just paying the minimum mortgage monthly payment would take 25 to 35 years, if you chose from 25 to 35 years amortization period.

Why that long? It is because most of the money you pay goes to the interest of the money you borrowed to purchase your house. The lower the interest rate, the earlier you can pay off your mortgage.

Many believe that whatever interest rate quoted by their banks are not negotiable and therefore, they simply sign on the dotted line without trying to negotiate. 

For example: if you signed a mortgage for a five-year term at an interest rate higher by 1% than you should get had you tried to negotiate or shop around, it would cost you about $7,500.00 in extra interest expense on a principal mortgage amount of $150,000.00.

That extra interest expense of $7,500.00 could have been credited to your mortgage principal amount had your interest rate was lower by one percentage point.

In the light of the above, when you are buying a house or renewing your mortgage you need to negotiate the interest rates, especially when your credit rating is perfect and you have a good employment income, the more you have leverage in the negotiation.

Interest rates posted by banks are not written on stones, they are negotiable. Before you negotiate with your bank on the interest rate, you need to shop around first by phone or through the Internet so you will know the prevailing rates posted by other banks.

In a negotiation, you bear in mind that banks are in the business of lending money for their money to earn interest, which is the primary source of their income. Therefore, they really need your business. 

If a mortgage officer would not budge, to reduce interest rate, you have to impress in the mind of a mortgage officer that you have the option of shopping around before you make any decision of signing on the dotted line. Usually banks would reduce their interest rate if you know how to negotiate.

To reduce your mortgage interest expense, you need to negotiate with your bank for interest rates are negotiable.


Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.