What Can Investors Negotiate with Mortgage Loan Officers?

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Negotiating the terms of your loan can be as important as negotiating the sales price of your new investment property. Interest rates and closing cost a huge part of cash flow and return on investment, with the proper due diligent and negotiations, investors can be rewarded on every real estate transaction.

What can actually be negotiated?

Closing costs and interest rates are probably the first thing investors try to negotiate, but there are others like, time, appraisal and title, volume discounts and pre-payment penalties.

Some investors have lots of money, but very little time, ask about streamline refinance and purchase transactions. They may require more money down, but less documentation and are very quick loans to complete. In some instances it can take half the time as a normal loan.

Just about everyone in real estate is looking for business. Appraisers and Title Companies are no different. I personally have renegotiated my fees with all the vendors I utilize and in turn passed that saving to my investors. Rates have been so good the last few months I had to reduce the cost of refinancing so my investors can break even quicker on their refinance costs.

I am a firm believer in building your power team, remember a loan officer should be part of your team, and ask for discounts only if you can offset that with volume or multiple transactions. Most investors realize that a good relationship with their loan officer usually saves either time or money, sometimes both.

Those investors that are holding on to the property long term ask if there is a prepayment penalty that will help lower your interest rate. Three year prepayment penalties are common on the right loan and could reduce the interest rate .5%-.75%. This is a situation you should have a clear exit strategy. If you try to sell or refinance before the penalty is expired, it could cost you up to six months interest.

Remember, there more than one way to save money in real estate and there is no reason you should not use all of them.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.