Negotiation to bring interest rate down
Only 1% interest rate difference would be so big in real estate investment and it would have so much impact on rental profit. Negotiating to bring interest rate down is one of the ways to succeed in real estate investment.
Merits of negotiation
・No costs occur
・No hassle like resisting property
Demerits of negotiation
・Risk to be dealt as default and hard to get a new financing
◆Difficulty in negotiation
Negotiation to bring interest rate down is not as easy as “OK, understood”.
Loaning is way to earn money for a bank so bring the interest rate down means a decrease in profit.
Your rep at the bank knows that you agreed to the loan terms and conditions so the bank gave you a loan.
In order to negotiate
・You have several years of repayment history
・Current interest rate is far out from the average market rate
・The property you purchased is doing great in terms of profit
In other words, the most important thing in negotiation is to become a customer that the bank would not want to “let go”. Paying back loan on time or leaving rental revenue in your bank account would have a positive impact to the bank. Having all rooms filled and making your tax return in the black would also work positively for negotiation.
◆Ingredients for negotiation
If your transaction with the bank involves huge amount of money, you are thought to be a good customer. This may be used to do the interest rate negotiation.
Here are the things that a bank likes to see you do:
・Installment Time Deposit
・Salary Automatic Transfer
・Purchase national bond & Investment Trust
Having these done for them and using as a bargain may result in succeeding in negotiation for lower interest rate.