1. Concessions are negotiated in exactly the same manner as a whole new mortgage. Your banker must be educated as to why you deserve special treatment. It is important to demonstrate how wonderful your application is when compared to the dozen or so mortgage files piled on the mortgage manager's desk. Yes, the length of time you've banked at the institution is important, but only after you've met the bank's basic criteria.
   
   
2. The better you look, the better the deal you can wring from the banker. When it comes to loans and mortgages, most banks have one-half-per-cent to a full one per-cent discretionary leeway in their posted rates. Simply ask for the best rate.Don't worry. They can afford it. Today's financial institutions are flush with mortgage money. The real-estate market volume is off in many markets by 30 per cent, banks are prepared to lend more, competition is fierce. Any stated bank rate can be beaten, just for the asking. If you're a "heavyweight" borrower, with lots of clout, you can get up to a three-quarters of one-per-cent reduction. Just by asking. More you may have special clauses, like no-frill mortgages or early closing.
   
   
3. Rather than the standard 60-day grace period on a pre-approved mortgage, banks will sometimes hold it open to a full 90 days. Cheaper money than the norm, held open for you longer than the norm...but only if you can give the banks solid reasons for doing so.
   
   
4. While banks should be more consumer-oriented and are doing their darn best to appear that way in their promotion literature and television ads, keep in mind any concession granted to you means less income for them.What you gain, they loses. If a bank is to feel comfortable making a smaller profit, it must feel secure knowing the profit is coming in without interruption. For example, by you shifting your other chequing, savings and other accounts and RRSPs etc. to the bank. While the bank won't get rich on your mortgage alone, it will benefit from having all of your business. Offer to give them everything and it should swing the balance in your favor.
   
   
5. Understand exactly what elements a banker seeks when appraising risk as the bank may not be willing to look beyond the surface facts on your application. But if all the "right" elements are there, the better the chance the loan will be approved without question. Banks rarely rely on charisma as the sole reason for granting concessions (the Reichmann brothers being an exception...and look what happened there). The more your strengths are reinforced on paper, the better and easier the negotiations.
   
   
6. Remember, the person you see and charm at the bank or financial institution may not be the one making the ultimate decision about your mortgage concession. Before you visit your banker, learn how to sell your application. Consider the following factors to determine your strengths:
   
   
   • Equity. Do you have more than 25 percent equity in your home or can you ante in a 25-per-cent downpayment on the manse or cubicle of your dreams? The stronger the chains that bind you, the happier the banker. Besides, if you default and the place goes into foreclosure, your 25-per cent interest should -- and will -- take the bullet for any losses if the market has meanwhile gone into a downturn.
     
     
   • Stability. Have you been working in your current field for two or three years? Have you suffered any interruptions in your work history? If so, be ready to explain why. Banks don't like fickle work histories and/or erratic incomes.
     
     
   • Cash flow. After factoring in the principal/interest payments and property taxes, do these payments represent less than 30 per cent of your gross income?
     
     Equity is the portion of the real estate asset which you own outright. As such, it's one of the most important elements of a mortgage application. Some institutions will lend mortgage money based on the borrower's equity (aka downpayment) in the property in question. The borrower might have relatively little income or job stability, but if he or she can come up with a sizable piece of cash, the application may still be approved. But even if they do have a stable income and work history, most people are either unable or unwilling to provide a 35- to 50-per-cent downpayment to mollify a skittish banker. But if the mortgagee ends up with "weak hands" and is forced to default, don't forget: the lender can fire-sale the property and still likely come out with a profit, whereas the mortgagee loses it all. Remember too, today's interest rates are still relatively low historically. When that cheap mortgage has to be renegotiated when it comes to renewal time and the mortgagee can't take the new financial strain, a default is likely. Being no fools, bankers are aware of this. To them, stability is more important than a large but fleeting wad of cash.
     
     
7. Some banks won't advance 75 per cent of value on non-residential properties. If you're not living in it and thus haven't as strong an emotional and practical interest in the place, neither does the banker. In general it's much easier negotiating a loan when the bank is asked to provide 65 per cent or less. Raw-land advances are generally 50 per cent or less than the property's value. But by placing the mortgage on your existing property, or offering it as a co-guarantee, advance amounts can be increased dramatically.
   
   
8. Call it a numbers dance but sometimes a large downpayment can save you a good chunk of money in both the short- and long-term. By law, banks can only advance up to 75 percent of the property's assessed value. Anything more than this and the subsequent "high ratio" loan must be reviewed and insured through Canada Mortgage and Housing Corporation. Which means, of course, an extra premium payment tacked onto each and every monthly mortgage payment. When taken to the end of the standard 25-year amortization period, that initial CMHC insurance can compound out to literally tens of thousands of dollars in extra payments. While there are more creative ways to obtain high-ratio financing such as vendor take-backs or involving alternative properties as collateral, in general, there will always be a premium or higher rate of interest on any mortgage loans greater than 75 per cent of the property's value.
   
   
9. As stability is the measure of your "reliability", if you've changed jobs within the past year, be sure to emphasize your previous and (it's hoped) uninterrupted experience in the industry in which you've committed your life. Before heading off to the bank, be sure to call the Consumer Information Department at the Credit Bureau of B.C. and see how you measure up. (In Vancouver, telephone: 685-2744. In other areas, check with the Better Business Bureau for the correct credit department.) The Credit Bureau acts as a reporting agency on personal and business credit worthiness. If something is incorrect or amiss in your file, send in the appropriate documentation and get it corrected. You may also enter a narrative to explain the extenuating circumstances behind any previous credit misunderstandings.
   
   
10. Cash flow or debt-service ability is probably one of the most highly scrutinized elements of any mortgage application. If you don't have a downpayment in excess of 35 per cent, the financial institution will be most interested in how you're able to prove your ability to repay the loan. If you work in a salaried job, proving this ability is simple. The banks simply want to be assured that no more than 32 per cent of your gross income will be dedicated towards the following: mortgage payments; property taxes; heat; one-half maintenance payments. Factor in all other debt obligations such as credit cards, car loans, alimony etc., and the complete load shouldn't -- in the bank's eyes -- exceed 42 per cent of your gross income.
    
    
11. If self-employed, proving your debt-payment ability becomes a little more difficult. The banks commonly look at a three-year average of your personal income to determine your qualification. You in turn may add auto expenses, depreciation, net income and, occasionally, rent (if your office is in your rental digs) etc. back into the mix. Most lenders recognize that self-employed people/businesses enjoy certain tax concessions and write-offs which means that smaller overall income actually translates out to a larger net income and thus a greater ability to support a larger mortgage. Before you visit the lender, see your accountant.
    
    
12. If uncertain of your standing and clout, make your run at the bank manager, rather than the mortgage officer. The manager often can make an immediate call on an interest-rate reduction; the mortgage officer needs permission.
    
    
13. Timing can also be an issue. In some markets and in periods when lenders are slugging it out for new clients, it's sometimes possible to be seen in a much more favorable light.
    
    
14. Tens of thousands of dollars can be saved by shortening the amortization period from the standar 25 years to a fewer number of years. Our favorite term happens to be 17 years. It maximizes benefits without unduly increasing the mortgage payment beyond the stretching point. Have your mortgage officer work out the mortgage repayment period over 25 and 17 years. Compare the payments: the amount saved is astounding. For instance, a $100,000 mortgage carried over 25 years carries a payment of $861 per month. Carried over 17 years, the payment is $978 or $117 more per month. But for the extra cost of $3 per day you will save $82,656 in interest payments. If an extra $100 a month is too much, make it an extra $50. The saving is worth it.
    
    
15. FINAL THOUGHTS
    
    Negotiating a mortgage when self-employed can be tricky. Before you go in, it's wise to contact the financial institution or your mortgage broker to get a handle on the policy for calculating self-employed cashflows and payment abilities. Forewarned is forearmed. You may try and find a co-signer (your benevolent mom or dad for instance).
    
    Equity, stability, cashflow: different financial institutions put different weight upon each of these three elements. A particular ratio that might fly with one, will flop with another. Some lenders demand your application have all three elements, others are comfortable with two.
    
    An important point: if you're refused by one institution, don't be discouraged. Instead, politely ask why, do your best to rectify the problem...and then go onto the next institution. (Or avoid the fuss and get your mortgage broker to do the dance on your behalf. Yes, this is a plug for mortgage brokers but remember, in the majority of cases they're paid a commission from the 'winning' lender and thus won't cost you a cent more than you would have paid for a 'normal' mortgage anyway.) In certain cases, say where two of the three prerequisites are "twisted" (i.e you have terrible credit and want to buy a swamp), you may be asked to replace the commission which would have been paid by the bank. This can run anywhere from one-half to a full one per cent of the mortgage...or more, if your situation is really twisted.
    
    To successfully negotiate a mortgage, remember that attitude counts. Lending has a very human element to it. If you're organized, courteous and make a small effort to assist the loans officer, you'll often discover that small variations or special requests in your application may be treated with "exception" and thus granted. The principal reason many mortgages are declined is because of poor communications between the client and the potential lending institution. In other words, comb your hair, have tidy and comprehensive paperwork and try not to shriek as per the opening paragraph to this article.
    
    In this crazy world, go long. A 6.5-per-cent ten-year mortgage (Jan 1999) and the 5.75% 5-year mortgage are at a 42-year low. Nobody has the proverbial crystal ball, but rates could suddenly rise. Play it safe and go for five years. If you must gamble, match your renewal date to the U.S. election year (autumn of autumn of 2000, autumn of 2004, 2008 etc. and so forth) where interest rates traditionally fall in a bid to cheer up the voters.
    
    Finally, get yourself organized. Get your "ducks in a row" in terms of a nice presentation, the offer to move your accounts in from the other financial institutions and so forth. And while you should always be polite (no screaming), polite people can still be firm. Bargain hard. Remember, a half-point reduction can save more than $3,000 in a five-year term. If you put that savings into paying down the principal, you're even farther ahead. Happy hunting.

jurock.com

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About the Writer
Ozzie Jurock is the president of Jurock Publishing Ltd., Editor of Real Estate Insider Publication and Author of Forget About Location Location Location

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