Negotiating a lower payment for your mortgage may be easier than you think. Banks don’t want to lose your business to a competitor. They also prefer a stream of regular mortgage payments to the risk of foreclosure proceedings or short sales. With foreclosures still stuck at record levels, many banks which were reluctant to negotiate before are willing to negotiate now. It never hurts to pick up the telephone and ask.
Before you pick up that phone, go on the Internet and see what mortgage rates other banks are currently charging. Pay close attention to term length, fixed-rate vs. variable rates, payment flexibility, penalty fees, whether a good rate is just a teaser rate, and other similar fine print.
Using your research as a guide, make a list of your mortgage needs, deal-breakers, what you are willing to put on the table, and what conditions you are willing to accept. Make a file of all the mortgage offers which are comparable to what you want, and bring those with you to the negotiation.
Make a list of your current banking assets, including all loans, investments, and major credit cards. Lenders may be willing to negotiate a better mortgage rate if you are willing to transfer other accounts and establish a broader business relationship.
If you want to negotiate a lower payment for your mortgage on the basis of having lost your job or other financial difficulty, do not wait to contact your mortgage holder until you are in deep trouble. Instead, take the initiative and approach them as soon as you realize trouble is looming.
You will need documentation of your financial difficulty and the timeline of events. The bank may or may not ask for it, but you should have it ready, just in case.
You should also have a proposed solution, including the size and frequency of payments you are able to make. Keep in mind that smaller payments may result in more payments over a longer period of time, which means that you will be paying much more interest overall. To avoid this as far as possible, be prepared to negotiate the rate as well as the payment size.
While you are researching and negotiating, do not stop making payments. That way, you will preserve your credit and reputation as much as possible, which will give you a better negotiating position. Continuing to make payments will also prevent foreclosure proceedings from being initiated against you.
Who to ask
Your usual bank contact number will take you either to your mortgage agent or to customer service. Your mortgage agent may have the power to negotiate a lower rate with you, but he also may not. Customer service definitely does not have that power.
In case of financial difficulty, go straight to your lender’s loss mitigation department and explain your situation, along with your proposed solution. They won’t be happy that you can’t make your current payments, but if what you have to offer is reasonable and you have an otherwise solid banking and credit history, they will probably prefer a negotiated solution.