will almost always get you a cheaper loan. But the overwhelming
majority of borrowers never try to negotiate. They assume it's not
"Yes, we can negotiate," says Sidney Lenz, executive
vice president at Countrywide Funding, the nation's largest independent
mortgage banker, "but not many people try. The interest rate
isn't negotiable, but we can certainly give someone a quarter-point
break on the points. And sometimes we can lower the attorney's
On a $100,000 mortgage, a quarter of a point equals $250. Add
in another $50 to $200 for the break on the lawyer, and you're
talking about an interesting amount of money--definitely enough
to make raising the question worth your while.
And Countrywide's tough. Many lenders are willing to negotiate
interest rates, especially if you make it clear that they won't
be getting your business otherwise. Knock down the rate on a $15,000
4-year car loan from 9% to 8.5% and you save $170.40 over the
life of the loan. Shave one-quarter of a percentage point off
the rate on a $100,000, 30-year mortgage (from 8% to 7.75% and
you save $6,246. These days, with the rise of risk-based pricing
formulas, consumers with excellent credit have more negotiating
leverage than ever before.
So what's really negotiable? "With mortgages, almost every
variety of closing cost is probably negotiable," says Paul
Havemann of HSH Associates.
You can't negotiate in a vacuum, however.
Shop carefully, so you know what you should be negotiating for.
To get someone to match or beat the best deal around, you have
to know what the best deal is. Make a lot of calls and perhaps
a few in-person visits (although you can certainly save money
even from afar).
You can bluff about your intentions--maybe you'll walk away
from the deal and maybe you won't--but you can't count on bluffing
lenders about the competition. Lenders usually have a pretty good
feel for the market.
Recognize the three types of negotiating leverage you have.
If you're already a customer, a lender will try very hard not
to let you find out that the money may be greener on the other
side of town. When asking for a better deal, tell the lender exactly
how long you've been a loyal customer and how much you have on
If you're likely to bring a lot of future business to a lender,
you can drive a harder bargain.
If you can convince a lender that you're the kind of tough, principled,
rigid (but not necessarily obnoxious) customer who is willing
to drive a half hour to save another fifty bucks, you're more
likely to get the best deal.
Especially Negotiable Points
The lender's attorney's fees. These are starting to disappear,
thank goodness. Tell the lending institution you'd prefer not
to pay for its lawyer. Mention that it's a conflict of interest.
Talk about another lender who doesn't charge for the service.
(Neglect to mention that that lender's rate is one and a half
percentage points higher.)
Document-preparation fees. "We charge $125 but will go down
to zero when we know we're really competing for the business,"
says David Davitch, executive vice president at American Financial
Mortgage Corp., a mortgage banking firm in King of Prussia, PA.
Points. Sometimes lenders like Davitch will give you a choice
-- either one-quarter off on the points or one-eighth of a point
chopped off the rate -- but many other lenders who seem horrified
at the idea of playing games with the stated interest rate will
perform all kinds of tricks with the points, if they think they
The rate. Make it clear to lenders that they're in a very tough
fight for your business. Mention competitors by name. Let the
lender know what terms he'll have to beat to win.
What do you do when a lender offers to match your best deal but
not beat it? Indicate on the phone or in person that this is a
pretty boring offer at this point. Heck, you already had that
deal in the bag before you had this conversation. Request that
a bone be thrown in your direction. You've come this far, and
now she's going to let you walk for a few dollars? You can't predict
what the lender will do in this situation; there are certain concessions
she can't make. But you can sure try.
(Note: The terms you're least likely to get a break on include
the application and credit-check fees.)
Before actually taking your business elsewhere, tell your current
institutional financial partner precisely what terms you're about
to accept. If your institution cares about keeping you, you may
be offered a very special deal. Even if the offer is a bit more
expensive, the convenience factor may make you stay put.
Refinancing with your existing lender can save you money in many
ways. The lender may waive the appraisal, title-search, and possibly
credit-check fees. It may also decide to update the title insurance
instead of getting an entirely new policy. And there's a good
chance that you'll get a better interest rate. But it helps if
When refinancing, ask the lender to order title insurance from
the same company that was used before -- and request a discount.
You can save 25%-40% of the approximately $400 charge.
Have Late Fees Waived
Smart borrowers can often avoid late fees as well. A good customer
who is late with a payment for any reason (neglect, emergencies,
temporary cash-flow calamity) should call the lender and ask to
have the late fee waived. This will often work--but only once
or twice on each debt. Just don't count on it. Try not to make
The approach can save $10 here, $15 there. Not a lot, but certainly
a reasonable return on an investment of a few minutes.
If you know ahead of time that you'll be a few weeks late, consider
alerting the lender before the due date.
You can also earn a huge amount per hour by calling the toll-free
number of your credit-card issuers and demanding a better deal.
Ask them to waive annual fees and slash interest rates. If you
have good credit, they'll do it more often than not.
To increase your leverage, mention that a more attractive credit
card offer--at 6.9%, 7.9%, or whatever -- just arrived in the
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