Personal Finance

Get What You Want from Your Bank

Comments 4 Comments

Negotiate-with-your-bank-blog Negotiating is an art, and a great way to save money. And as a nation, we’re getting good at it. Earlier this year, Consumer Reports surveyed more than 2,000 adults and found that more than 60% have bargained or asked for a discount at least once during the past three years.

We know negotiating works at stores and flea markets, but what about banks? Despite the credit squeeze, you can still make a good argument for getting what you want these days – and be successful. The survey found that those who negotiated with their banks over fees were successful at least once 87% of the time. And the majority of those negotiators saved anywhere from $50 to $100 as a result.

I, too, have had success getting a lower interest rate or eliminating some overdraft fees. Most recently I hit the jackpot and managed to get a costly bank “requirement” waived.

Here’s the story: I am almost done refinancing a second home. At the last minute, my broker told me I needed to get “six months of gross rent loss insurance” to compensate for potential loss of rental income in the event that property damage made the apartment uninhabitable. It’s currently a Fannie Mae prerequisite for all second home refinancing applicants. (Note: Despite my clean bill of credit and savings, it’s taken more than three months to get this deal sealed.) So I called my insurance company, Allstate, for a quote.

My Allstate agent had never heard of it. My mortgage broker quickly assured me he could “find me another insurer who could help me.”

Days later – and one week from closing – I learned that rental loss insurance is only available as a rider to your existing homeowner’s insurance policy. I’d have to ditch Allstate altogether and work with some other company and lose the ability to shop around for the best deal since I’d probably be choosing between Joe Shmo and WhatsHisName Insurance Agencies, the only places on earth that offer this unknown insurance contract. Can you tell I was getting angry?

Here’s the exact e-mail response I sent my broker:

“What an inconvenience…I just renewed my insurance policy (paid in full) and don’t know if I can easily make this switch…If there is ANY way around this, please let me know. I have no financial need to rent out the home. I am fine making the payments based on my income and savings.

The fact that Allstate insurance, one of the largest insurance agencies in the country, does not provide this speaks volumes about the obscurity of this insurance.”

Minutes later, my broker replied, agreeing to follow up with underwriting. Two days later, success. The insurance was waived.

Active time to negotiate: 45 seconds. Potential savings: at least hundreds of dollars.

While I think my stern e-mail helped, I probably couldn’t have done it without a few other supporting factors. Here are a few takeaways to help anyone looking to cut a deal with a bank.

To be a successful negotiator…

  • Have Great Credit. Not just OK credit, but great credit. A score well in the 700s and a spotless credit report are facts that can give you, well, credibility. My broker knew about my credit score and I reminded him that I have enough savings and income, as well, to cover the mortgage on the property. I had no need to rent the unit, therefore 6 months of rent loss insurance was unnecessary.
  • Stand Firm and Take Advantage of Timing. I was frustrated and my broker knew that well. While I never made threats to ditch the application process, I did express that I was not going to bend over backwards to fulfill this “requirement.” I also knew the bank and broker were knee-deep in the deal, just as I was. It was in everybody’s interest to make it work at that point, which is why negotiating then was a perfect time.
  • Get a Second Opinion. Throughout this refi process I was also speaking with another mortgage broker, a friend of a friend, who was making sure my existing broker (who came highly recommended) was playing by the rules. When I had concerns about the good faith estimate and other details, I’d run them by him for a second opinion. Then I would mention this to my existing broker, so he knew I was on top of things. It wasn’t a threat, just a friendly and occasional, “That’s what my friend, a mortgage broker, told me, as well. I asked him for his opinion.” Meantime, in my broker’s mind this likely translated as, “I’d better keep her happy.”

In the end, he did.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Credit Expert

    Getting the rate you want, or even simply the rate that has been advertised, can be somewhat difficult to say the least. Make sure you check and understand your credit report to try and stay one step ahead of the game :)

  • file bankruptcy

    This whole premise is based on the assumption that the bank will be willing to work with you. I have dealt with some banks who thinks that their financial position is so strong that they do not need to work with customers to restructure the various debt accounts. In that case, no matter what you do, you just cannot convince them to give you a better term.

  • Pat

    Farnoosh, I think what your broker did not say is that the insurance can be waived IF the property owner does NOT need the rental income to qualify. So when you told your broker, “I have no financial need to rent out the home. I am fine making the payments based on my income and savings,” he/she was then able to waive the insurance.

    The broker should have known this prior to requesting that you obtain the insurance. When a borrower does not need rental income to qualify, lots of things change. Only after you mentioned you did not need to use the rental income did the loan officer find out about the general exception. Probably someone inexperienced with rental property guidelines.

    I have been in the mortgage business for 10 years and I absolutey assure you that in the current mortgage climate, there are no special deals made with any borrower because they have good credit or otherwise. Stern emails won’t do the trick either, Borrowers either qualify based on the lender’s guidelines or they don’t get the the loan. Especially where insurance is required, the lender is not going to make any special considerations for any one borrower. The underwriter is going by required Fannie Mae, Freddie Mac or FHA guidelines. And in the situation where that loan will be sold in the secondary market, the underwriter abides by guidelines, especially if they want to keep their job.

  • Pat

    Interesting that my comment about rent-loss insurance was moderated and deleted. Very interesting. Seems you have a blog that has no room for opinions or real facts that differ from what you state.

    You are giving readers bad information about rent-loss insurance AND bad info about how someone can “negotiate” terms of a mortgage loan. The average Joe Schmo cannot negotiate with any bank on a mortgage loan.

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