Is it possible to reduce the mortgage interest rate

How to lower the interest rate when applying for a mortgage

The easiest way to pay off a mortgage at a low interest rate is to take out a mortgage loan on the most favorable terms. To do this, you can use several tricks:

1. Contact your salary bank, since credit organizations offer the most favorable terms to clients who receive their salary into an account with them. For lenders, this is an additional guarantee that the borrower will definitely make monthly loan payments.
2. Confirm your income. This is especially important if you receive "black" or "grey" wages or have additional sources of income. If the lender is confident in your solvency, they will offer you more favorable terms. 
3. Choose a property in a newly built building. Banks offer a lower interest rate to clients who buy an apartment from developers. In addition, in this case, you can take out a mortgage under a subsidized lending program.
4. Make a larger down payment. When applying for a mortgage, you must make a down payment of at least 10-15% of the loan amount. If you offer the bank a larger down payment, you may be offered more favorable lending terms.
5. Take out insurance. It's no secret that banks offer the most unfavorable terms to clients who refuse to take out life and health insurance. Therefore, if you want to lower your mortgage interest rate, we advise you to arrange personal financial protection. 
6. Close other loans and credit cards. If you have a high debt load, banks cannot be sure that a situation won't arise one day where you have nothing to pay your mortgage with. 
7. Offer the bank an additional guarantee in the form of collateral for other property or a guarantor. This way the lender will be sure that you will pay off the debt even in unforeseen situations.
8. Involve a co-borrower. In this case, the credit organization will take your total income into account and therefore will be able to offer more favorable mortgage lending terms.

Is it possible to lower the interest rate on an existing mortgage

There are several ways to improve the terms of an already issued mortgage loan: 

1. Refinancing. This method consists of re-crediting an already issued mortgage on more favorable terms. Usually, you can refinance a loan at another bank. However, this can also be done at the credit organization where the mortgage was issued.
2. Restructuring. This method allows you to slightly improve the lending terms: increase the mortgage repayment term or reduce the monthly payment. And although the interest rate will remain unchanged, paying off the loan will be more comfortable. 

Before reissuing a mortgage at another bank, we recommend taking into account the reissuance costs. You will most likely need to pay for property appraisal, removal and imposition of encumbrances on the apartment, purchase a new insurance policy, and so on.

Please note that banks reserve the right to refuse you refinancing or restructuring. When making a decision, credit organizations take the following factors into account:

• presence or absence of overdue monthly payments;
• date of mortgage issuance;
• remaining debt amount;
• current interest rate.

When it is profitable to lower the mortgage interest rate

Before lowering the interest rate on an already issued mortgage, it is necessary to assess how profitable this decision will be. Each monthly loan payment consists of the principal debt and accrued interest. At the very beginning of the payments, the bulk of the payments consists of overpayment for the use of money, and at the end of the payments — the principal debt itself. 

That is, if you have already paid off half of your mortgage, applying for refinancing will not make sense, as it will lead to additional expenses for interest overpayment, re-evaluation of the property, and property insurance.

However, it is profitable to try to lower the mortgage interest rate, for example, in the following cases:

• if your family is expecting a new addition and your expenses will increase significantly in the near future;
• if you have been transferred to a lower-paying position;
• if you are about to retire;
• if you have health problems or have been granted a disability status, and so on.

Why a bank might refuse to lower the mortgage interest rate

Banks most commonly refuse to revise the terms of an existing mortgage for the following reasons:

• due to frequent overdue monthly payments;
• due to a refusal to obtain life, health, or collateral property insurance;
• due to a poor credit history;
• due to a high debt load at the time of applying for refinancing.

State-supported mortgage lending programs in 2024

As we mentioned above, if you are purchasing a property in a building under construction or a newly built home, you can take out a mortgage on preferential terms. The terms of government-supported credit programs are presented in the table below.