Whether you are buying a property and getting a new mortgage or refinancing your mortgage, you want to get the best mortgage rate possible with the lowest fees.
In an ideal situation, you want to get the lowest interest rate possible at the time with no fees. Just no that there's really no such thing as a no-cost mortgage or no-cost refinance. Everything is baked into the price.
Believe it or not, mortgage rates have been trending down since the late 1980s. It's as if the Federal Reserve has figured out how to properly manage inflation and full employment, their two goals.
Declining mortgage rates have been a boon for property owners, and I expect mortgage rates to continue to stay low for the rest of our lives. Let's now look into how to get the best mortgage rate possible.
The Best Way To Get A Low Mortgage Rate With No Fees
The key to getting a better price is to always generate competition. For example, the more employers compete for your services, the more you will get bid away for a higher salary.
The same thing goes with creating a bidding war when you're trying to sell a house or an item on eBay. The more bidders, the higher the prices goes. We all have a certain level of desire that ticks up once we know someone else wants the item as well.
Here are the steps I recommend taking to get the best mortgage rate possible with no mortgage fees. Not paying and refinance fees or mortgage fees is generally better because it gives you more flexibility to sell the property without wasting too much upfront expense.
1) Get written offers from multiple lenders. Verbal offers mean nothing. Everything must be in writing in order for you to get the best rate possible. I recommend filling out your free request on Credible, a leading lending marketplace to get multiple real quotes from qualified lenders.Their lenders will contact you over the phone and on e-mail to offer you their best rate possible.
2) Contact your main bank. Your main bank is the key to getting the best mortgage rate possible with no fees. They have a lot of your money and you probably have multiple accounts open with them. They certainly don’t want to lose your business. Nor do you really want to move your assets to a new bank if you don't have to.
You need to present those written offers you got from Credible or elsewhere to your banker or mortgage loan officer and tell them to beat your written offers, not just match. If you have uncompetitive written offers, then you need to continuously search for better offers to get your relationship bank to beat.
3) Add more assets. A bank wants its customers to have as much money with them as possible. After all, a bank depends on deposits to then lend out for a profit. Further, banks want you to open up as many different accounts as possible to keep you as a sticky customer.
Examples of different accounts include: checking account, business checking account, savings account, mortgage account, wealth management account, home-equity line of credit, and a personal line of credit.
It is my experience that banks have three tiers for client relationships and providing the best rate: Tier 1: $250,000+ assets, Tier 2: $500,000+ assets, and Tier 3: $1,000,000+ assets.
The more assets you have with the bank, the lower your mortgage rate and refinance costs.
4) Be ready to transfer funds away. To get the best deal when buying a car, you must be willing to walk away. The dealer would rather make a measly $500 off you than nothing at all, especially during month end when quotas need to be met.
Although moving funds is a hassle, you've got to be willing to move your assets if your relationship bank does not match or beat a competing offer. The more assets you threaten to move away, the more then will bend over backwards to hold onto your business and give you the lowest mortgage rate possible.
Some banks might even be willing to lose money on a mortgage refinance or new mortgage if they know they can make money off your assets down the road.
You don't have to close all your accounts. You just have to be willing to open up a new account with a different bank and go through the process of electronic funds transfer.
Always Negotiate Aggressively
Banks are in the business to make money. You are in the business to save as much money as possible to provide for you and your family.
Always be willing to negotiate aggressively for the best mortgage rate terms as possible. Don't take things personally. Banks certainly don't.
Consider also taking out a 5/1 ARM, 7/1 ARM, or 10/1 ARM. The rates are generally 0.5% – 1.25% lower than a 30-year fixed mortgage, which I think is a rip-off.
The average American only owns his or her home for eight years. Therefore, to lock in a higher rate much longer than eight years is a waste of money.
I hope everyone can take advantage of lower mortgage rates and get the best deal possible.
Check the latest mortgage rates online through Credible. They’ve got one of the largest networks of lenders that compete for your business. Your goal should be to get as many written offers as possible and then use the offers as leverage to get the lowest interest rate possible from them or your existing bank.
Credible allows you to compare multiple real quotes, all in one place for free. When banks compete, you win.
Alternative Real Estate Investment Idea
If you're looking to buy real estate as an investment, I highly recommend looking into real estate crowdfunding with Fundrise or CrowdStreet. Both are free to sign up and explore.
Fundrise and CrowdStreet have vetted commercial real estate investment opportunities across the country that were once only available to institutions or ultra high net worth individuals.
Real estate crowdfunding is a good way to diversify your real estate investments with as little as $1,000 per investment instead of coming up with a 20% downpayment and leveraging up for a single asset.
I personally sold my San Francisco rental in 2017 that only had a 2.5% cap rate and reinvested $550,000 of the proceeds in real estate crowdfunding with a 12% cap rate. Making money passively through real estate is great compared to having to manage tenants and maintain the property.
Fundrise is my favorite platform that is available to all investors.
The great thing about CrowdStreet is that they focus on secondary cities, where valuations are lower, net rental yields are higher, and growth rates could be stronger due to migration.
