Five top tips for saving money on your mortgage

Riksbank, Sweden's central bank has cut its key interest rate to 3.75% from 4.00%. Now Swedish banks are lowering their variable mortgage rates, which means this is a prime opportunity to contact your bank and negotiate a better rate. Here are five tips to help you save money.

Lägre bolåneräntor hägrar efter Riksbankens räntebesked. Arkivbild.

Lägre bolåneräntor hägrar efter Riksbankens räntebesked. Arkivbild.

Foto: Janerik Henriksson/TT

Ekonomi2024-05-10 10:34

Negotiate for a better rate

–  Not everyone qualifies for the absolute best rates, but assertive customers who call and inquire can often secure a slightly lower rate, according to Christina Sahlberg, an economist at Compricer, a comparison website.

Here's a negotiation tactic: "Other banks have offered me these rates. If you want to keep me as a customer, are you willing to match or beat them?"

Shop around and gather information

Feeling loyalty to a single bank or finding negotiation uncomfortable shouldn't stop you from exploring your options. Many banks offer online rate comparison tools. Use this information to understand average rates and build a foundation for negotiation.

Consider switching banks

If you're seriously considering transferring your mortgage, your existing bank may counter with a more attractive rate to retain your business. Asking for an amortization statement from your current bank for the new lender, might signal your intention to leave, prompting your current bank to offer a better deal.

Understand your leverage

The loan-to-value ratio (LTV) and loan size heavily influence the rate you can negotiate. Borrowers with a higher down payment (e.g., borrowing 4 million kronor on an 8 million kronor home) have a stronger bargaining position.

– This is ideal for the bank, explains Sahlberg.

– It reduces their risk while securing a significant loan amount, often resulting in a better rate for you.

Conversely, borrowers with a lower down payment (e.g., borrowing 50% on a 1 million kronor home) will likely receive a less favorable rate.

Consolidation vs. best rate

While bundling loans, pensions, and other services with a single bank can be convenient, prioritize securing the best possible mortgage rate. Sahlberg emphasizes the value of shopping around for a better mortgage rate. Is putting all your eggs in one basket really really worth it? It might mean missing out on a significantly better mortgage deal elsewhere.

Variable vs. fixed rates

Choosing between a variable (e.g., three-month) or fixed rate mortgage ultimately comes down to your risk tolerance. Currently, with falling interest rates, a fixed-rate mortgage might lock you into a higher rate in the long run. 

Historically, variable rates have been more favorable, but future trends are uncertain. If you opt for a fixed rate, choose a shorter period to maximize your chance of securing a good discount.