Our lender is offering us a 5.8% rate to refinance from our current 7.2% rate. This would save us about $300 a month. However, I’m hoping to get an even lower rate.
My question is, can you negotiate a lower interest rate with a lender? I’ve never tried this before and usually just accept the rate they offer. I feel like there might be room to negotiate, but I’m not sure where to begin.
What do you suggest? Has anyone here ever successfully negotiated a lower rate?
They can’t simply change their fees; you’ll need to bring in another lender.
You would need to buy down the rate. At 5.8%, you might already be partially buying it down.
Sure. If you pay points.
I see. I’ll ask about this.
Is there a specific reason to do that now instead of waiting a few more months to refinance? More rate cuts seem likely, though no one can predict the future with certainty.
Yes, it varies a lot. I’ve worked with smaller lenders where the pricing was terrible and there were no discounts, but that’s not true everywhere.
I’ve also worked with bigger national lenders in call centers. They often have some flexibility with pricing, and it doesn’t hurt to ask. If they need a reason why you’re not moving forward, they’ll consider whether the loan is still profitable. If it is, it’ll get approved; if not, it won’t.
You need to know exactly what you’re negotiating. For example, what’s the cost at a 5.875% rate? Just knowing the rate isn’t enough. They might offer rates between 5.375% and 7.5%, but each rate has its own cost. You could ask for a 5.5% rate, but if they just lower the rate and add extra fees, it might not be a better deal.
You’re already buying down the rate at 5.8%, which will come with a lot of fees. It’s better to wait until 2025 to refinance. Be cautious of deceptive refinancing offers that might come your way as the year ends.
You can definitely negotiate. In my area, the typical compensation for a loan officer is 2.5%, which is covered by the lender because they offered you an interest rate high enough to cover that commission. By avoiding this commission, you can secure a significantly lower rate. So, you can either negotiate for the loan officer to receive (x)% and pay them directly or accept a rate that includes (x)% commission instead of 2.5%. It’s quite straightforward.