We are in part three of our series that addresses common misconceptions and erroneous assumptions about loans, insurance, debt and other financial matters. We are still left on the loan section, so there will be some more ideas about loans that we are trying to punch.
Mortgages cannot be bargained for
Some may not think this is a common misconception because they know that it is possible to bargain / negotiate on mortgages, but it is probably far from anyone who knows or is actually trying to bargain with the bank. Because the mortgage is such a large loan, even small differences in interest rates can make a lot of difference over time, so it’s worth trying.
So it is often good to bargain a little because you as a customer have a big advantage. The bank wants you as a customer because they make a lot of money on you. If they don’t have you as a customer then someone else has it instead. It is a good starting point for you.
For starters, you should be well prepared. Check out current mortgage rates and talk to someone who has recently negotiated their mortgage. Also, consider the strengths of your finances, what arguments you could put forward to get a better deal on your mortgage. It is about selling your finances and showing the benefits.
You can become a full customer at the bank if you are not already
Then you often get better conditions in general and various benefits. In the same way, you must be prepared to test another bank if you are not satisfied with what they offer. If you are not prepared to change, you have nothing to scare your bank with. If there is another bank with better conditions and who handles its customers better, it may still be worth switching.
One thing that is good when you are going to bargain on your mortgage is for example that you have a good economy and good credit. That’s a big plus that you can use as an argument. The bank is often fond of people with good financial conditions and you can even point this out as a way to convince them to give you a little better terms.
If you have also been good at repaying earlier this is also a good sign and it is something you can use as an argument. Likewise, if you are good at saving money, then it gives a strong economy and reduced risk to the bank. If they do not address these things, you can do it yourself and point out that you are a good and stable customer.
A loan promise is a guarantee that you will be able to borrow
This is an assumption that goes very quickly to comment. A loan promise is not the same as actually getting your loan. It is basically a written proof that you obtain from the bank to show up to the seller / broker as proof that you are actually a real buyer who is able to buy the home. It says how much you could borrow. Without a loan promise, the seller may not even consider your bid.
The loan promise shows how much money you could borrow if you chose to take out a loan from that particular bank at that particular moment. This means that if you bought the house right then you could borrow that sum but at the same time things can change. If you need to borrow money three months later, you may not be able to borrow as much longer, for example because you have lower income or if something else has changed that affects your finances.
Usually, it is usually not a problem to borrow the amount your loan promise says, but you should know that there is a difference in the loan promise itself and then really get a loan. Think about it and if your finances have changed since you got your loan pledge, you might want to check with the bank again so you don’t have problems with the loan.
You can contact the bank to get a loan promise and it is usually very smooth. It doesn’t cost you to get a loan pledge, nor is it binding, so you don’t have to borrow just because you get one.