How to Negotiate Your Mortgage Credit

 

Several steps are required before obtaining a mortgage credit. One of these crucial steps is to negotiate with your banker in order to subscribe to the most advantageous loan for you. It is not only about reducing the interest rates, but also obtaining advantages on the collateral fees involved in the subscription of a loan, such as insurances, application fees, penalties for early repayment, etc. Follow our advice to learn how to negotiate your mortgage credit.

How to negotiate a mortgage loan?

Knowing how to negotiate a mortgage loan – and with what perspectives – first requires knowing the minimum state of the market. And notably, keeping an eye on the average interest rates practiced at the time when you decide to go on a quest for the loan of your life. Indeed, the rate is the main lever to negotiate your mortgage credit.

The mortgage rate will evolve according to:

The borrower's profile: personal contribution, income, saving profile, etc. (see the "5 arguments to negotiate" a little further down);

The duration of the loan: a mortgage loan subscribed for 25 years is offered at a higher rate than a loan for 10 years, the risk being higher.

But the rates also change depending on the economic context. This is a dimension not to be overlooked: at the moment when you seek to obtain credit, average rates can be around 3% or 1.5%, which is not quite the same thing! Although disparities are significant depending on the profiles, it is recommended to negotiate your mortgage credit by having a very precise idea of contextual borrowing rates.

Another essential point: during your research, you should consider not the displayed rates - often attractive - but rather the rates that encompass all fees. This is what is called the APR, or Annual Percentage Rate. This APR provides you with a better basis for comparison and negotiation.

Negotiating your mortgage credit: the 5 key arguments!

Knowing how to negotiate a mortgage loan generally involves learning how to present the right arguments to your banker - the arguments that, as they say, make it impossible to refuse a proposal. But what are the 5 key arguments to negotiate your mortgage credit?

Inject a high personal contribution

Few banks grant a mortgage loan without a personal contribution: count at least 10% of the total, enough to cover notary fees and guarantee fees. But for those who are able to inject a much larger contribution, between 15 and 30%, it becomes much easier to assert their arguments to negotiate their mortgage credit and obtain a reduction in rates.

Since money doesn't fall from the sky, there are several solutions for you to build up a contribution:

Save up slowly, even if it means postponing your real estate purchase project to build up a small nest egg;

Add to your loan an advantageous loan granted by the State (zero-rate loan), local authorities, Action Logement or any other public organization (mutual, Retirement Fund);

Borrow money from your loved ones to use as personal contribution: this is a sum to be repaid on which you will not pay interest.

Show that you have a low debt-to-income ratio

Another key argument: you have a debt-to-income ratio below the average. The debt-to-income ratio - or capacity - is determined by the difference between your income and your financial charges for the month. Generally, a borrower's debt-to-income ratio should not exceed 33%: this is the percentage...

If your debt ratio does not exceed 15%, then your profile will be considered excellent by the bank. It is recommended to emphasize such an argument in order to negotiate your mortgage. Use the Youfinancer simulators to determine your debt capacity!

Demonstrate that you have significant income

In exceptional circumstances, a bank may agree to exceed this threshold of 33%: this will be the case if your income is high.

The debt ratio aims to ensure that the borrowing household will have enough to live on once their monthly expenses are paid. This amount is what is called the "remaining living expenses". Of course, the importance of "remaining living expenses" cannot be quantified in the same way if your income is €1,500 or if you earn €10,000 per month. In the latter case, even if you repay €3,333 per month (33%), the remaining living expenses are €6,666, which is relatively more comfortable than €1,000 when you pay €500 per month.

Therefore, high income or possession of significant assets are just as many arguments to negotiate your mortgage in the right direction!

Show that you are an ant rather than a grasshopper

The bank pays special attention to your account management profile: this is what will determine your borrower profile, namely whether you are more of an ant... or more of a grasshopper!

Before negotiating your mortgage with your bank, it is therefore strongly recommended to ensure sound financial management: no overdrafts in the last few months, no payment incidents, no expenses that indicate a lifestyle beyond your means, no ongoing consumer credit, etc.

In case of a temporary setback, a piece of advice: postpone your request for a few months. It is more interesting to negotiate your mortgage when your financial situation is perfect, even if it takes a little more time!

Show that you are a good customer

Being a good customer and having a good profile are two different things. A good profile leads the bank to trust you, but it is not yet ideal for negotiating your mortgage. For this, the best thing is still to show the bank everything you can bring to it.

Did you know that for most banks, mortgage loans and attractive rates serve as bait: they are products designed to attract interesting profiles. If you have a good professional situation, comfortable income or a high net worth, transferring your accounts to the bank and taking out financial products offer you a perfect negotiating lever.

Opt for the services of a mortgage broker

The best answer to the question of how to negotiate a mortgage is still: by leaving it to a professional! Using the services of a mortgage broker has many advantages: they will compare offers to find the best one, negotiate attractive conditions with banks, and arrange for you to get a reduction in the borrower insurance rate or waiver of processing fees. Furthermore, they will know which bank best suits your needs and profile. They will always have better conditions by defending your case since they work on volume compared to your unique and singular case.

Conclusion:

In conclusion, obtaining a mortgage credit involves several crucial steps, and negotiating with the bank to subscribe to the most advantageous loan is one of them. To negotiate a mortgage loan, it is important to know the minimum state of the market, especially the average interest rates, and the economic context. When negotiating, one should focus on the APR rather than the displayed rates. There are five key arguments to negotiate your mortgage credit, including injecting a high personal contribution, having a low debt-to-income ratio, showing significant income, being financially responsible, and being a good customer. By presenting these arguments, it becomes easier to negotiate a mortgage loan and obtain a reduction in rates.