The Globe and Mail recently surveyed more than 300 mortgage holders throughout Canada to ask them whether they took their lender’s posted rate when they applied for their mortgage, or whether they put their bargaining skills to the test and tried to negotiate for a better rate. The results are surprisingly, and encouragingly, high – with 82 per cent of respondents saying that they did negotiate a deal, and they got a better price because of it.
But some owners still choose not to negotiate, instead settling for whatever the posted rate is in favour of actually dickering and bargaining with intimidating lenders.
Sarah Yu, who just purchased a home in Vancouver last year says that she felt the same way. “It was nerve-wracking as it was my first time purchasing a home,” she says, adding though that, “It wasn’t tough to negotiate at all,” once she was actually in speaking with her lender. She brought down her lender’s posted rate to 2.79 per cent for a three-year fixed rate mortgage. And that kind of discount isn’t uncommon, to those that are only willing to ask for it.
As you can see from the above chart, 45 per cent of those that bargained for a better rate were able to secure rates at 3 per cent or less; while 5 per cent of negotiators ended up paying more than 4 per cent. When you take into consideration the number of people that didn’t bargain for a better rate, 16 per cent of respondents said that they ended up with an interest rate of 4 per cent.
Penelope Graham, spokesperson for RateSupermarket, says that negotiating a rate – no matter how small – can save homeowners thousands of dollars in their mortgage.
“Using the CMHC national average resale price of $363,740 as an example, and a 25-year amortization, you’re looking at a monthly payment of $2,116. Compared with 2.77 per cent, the lowest five-year fixed offered on the market today, that’s a difference of $437 in monthly payments. This will add up to $5,244 a year, and $131,000 saved over our entire amortization.
“If this same client negotiated down 20 basis points, to 4.80 per cent, they’ll save $505 each year, and $12,600 over 25 years.”
And another homeowner in Victoria says that those huge discounts the banks offer for a “limited time only” may still be around after their expiration dates. Selena Kwok says that when she was a little late cashing in on the discount her bank was offering, she was able to negotiate that rate anyway.
“At that time we were worried that we were not able to hold onto the 2.99 per cent rate because banks had stopped offering that rate and interest rates were supposedly going to rise. But we were able to easily get our banks to extend that rate for us.”