A Practical Guide To Negotiating For The Lowest Refinance Rates & Fees

Everyone knows that shopping for the lowest refinance rates will get you a better deal. What most people don’t know is that you can negotiate the terms of your new home loan when refinancing. In fact, negotiating fees and terms while shopping for the lowest refinance rates will get you the best deal if you go about it properly.

Here are several tips for getting the lowest refinance rates without paying unnecessary fees at closing.

Refinance Rates Can Be Deceiving

There are fees you can negotiate when refinancing that directly impact your bottom line (think payment amount). The two most commonly overpaid refinancing costs include the loan origination fee and discount points. Mortgage brokers and loan officers generally work for a commission. They receive part or all of the loan origination fee which could be split with a bank or lender. The more you pay for the loan origination fee the less benefit you’re getting from finding the lowest refinance rates because you’ll spend more time recouping your higher out-of-pocket expenses.

Discount points directly affect the refinance rates you’re getting as a way of buying down your interest rate. Most banks and lenders quote rates that include discount points meaning you have to pay the fee in order to get that particular interest rate. One full discount point is one percent of your loan amount; however, it’s common to find refinance rates quoted with varying fractions of a point.

Refinance rate shopping only makes sense if you’re making an apples-to-apples comparison of offers across lenders and it’s extremely difficult to do this with points in the mix. Should you agree to pay discount points? Refinance rates are still near the lowest levels in history so there is very little gained from paying points for anyone but your lender.

Always start your negotiation for the lowest refinance rates and fees with a zero point quote across several different banks and lenders.

Mortgage Refinance Rates Can Be Negotiated

The interest rate you get can also be negotiated especially when working with a mortgage broker. Your broker works from daily rate sheets from a variety of lenders and has a degree of freedom when quoting refinance rates just like the sticker price on your car. It’s worth mentioning that not all loan officers have the freedom to make concessions on refinance rates. This is why I recommend you start shopping with small community-based credit unions and independent mortgage brokers.

Closing Costs & Third-Party Fees

You will encounter fees refinancing your mortgage that cannot be negotiated. This includes taxes and fees paid to your State for transfer and recording the deed or a survey. Your appraisal fee cannot usually be negotiated because this is done by an independent appraiser that you have no say in selecting. When it comes to services for title searches and your homeowners insurance, inspections and attorney fees you have a voice in selecting who you’re working with, meaning you could shop for services with lower fees. Once you compare third-party fees from several lenders you’ll get a sense for what’s reasonable and which lenders are padding their fees.

How to Haggle With Mortgage Lenders

Shopping for the best deal on the lowest refinance rates is difficult because different lenders have different fee structures. Some lenders even invent names for their fees just to confuse inexperienced homeowners. There are also junk fees that you have no business paying like fees for copies and couriers.

You can find a list of the fees on your Truth-in-Lending disclosure form and on the HUD-1 settlement statement. It’s a good idea to go over each fee line-by-line with your loan officer and question everything.

Want the best deal refinancing your home loan? Question Everything.

Once you’ve done this you can approach your loan officer with rival lenders’ offers as leverage for negotiating. “This is what lender XYZ is offering with these fees. I’ll pay you this amount for this mortgage rate.”