Negotiating at end of teaser rate

June 18, 2007 2:52 PM

Do most people try negotiating near the end of a teaser rate?

When we bought our home last year, we went with a one-year teaser rate, to be followed by a variable or fixed rate based on prime minus X. The time on the teaser rate will expire in a few months. Someone I met recently suggesting negotiating before locking in -- she works for a branch of our bank and said we should try to get a better rate, now that we've had a mortgage with the bank for a while. I was wondering how to go about doing this and whether it is normal. (I'm no longer in touch with this person, who I met during a course.)

I am aware of the benefits/drawbacks of teaser rates, so no need to get into that. However, I did wonder whether others had tried negotiating for a better rate as their teaser rate came to an end. I tried talking to my mortgage broker, but he said those discussions would be between us and the bank, as he's out of the loop now.

I know how to project the costs of switching to another bank vs staying with the rate at my lender. I suppose I could use that as fodder. But other suggestions are welcome. I guess it never hurts to ask, though.

posted by acoutu to Work & Money (4 answers total)

Yes, you can negotiate. Some banks, the ones that don't sell their loans typically, will even have a streamlined process for refinancing to a lower rate for current loan holders without the high fees etc. Our bank once offered us a rate adjustment for a $375 fee and without all the boots and suspenders of a full refi. They don't want you to refinance with someone else. This will only work for you if the current rates are lower than your lock-in rate.
posted by caddis at 3:05 PM on June 18, 2007

Response by poster: Do you just phone in and ask or should you use some sort of tactic? FWIW, our incomes are much higher this year than last, our net worth is higher, and our home value is higher. We also now have no other debts -- we previously had a small leverage amount for investments. (But we did have an excellent credit profile last year, so I don't know if any of this maters.)
posted by acoutu at 3:17 PM on June 18, 2007

Did you see a particular loan officer or other bank person when you signed up for the mortgage? If yes, call that person. If no, then you'll need to call around. Hopefully your loan was not bundled and sold in a securitized form, which is what happens with a lot of mortgages. If it was bundled and sold, I understand it can be more a hassle to renegotiate terms and you might need to just refinance.
posted by Mid at 4:56 PM on June 18, 2007

Oh -- and the only tactic you need is to tell them that you think you can save a bunch of money by refinancing. Either they care or they don't--if they care, they will bargain, if they don't, you'll have to refi.
posted by Mid at 4:59 PM on June 18, 2007