The cost of a mortgage is affected by many factors, including the margin charged by the bank. Its exact value depends on the chosen financial institution and several side factors. What exactly is mortgage margin? What is it responsible for?
Mortgage loan margin – what is it?
The margin of mortgage credit is nothing else than the bank’s profit, which is obtained as a result of paying off the obligation by the customer. It does not usually have a fixed value because it is calculated taking into account several factors. Some financial institutions offer a lower margin, while in others this fee is much higher.
The margin of a mortgage loan is only one element influencing the final cost of the obligation. This is because it is part of the total interest rate. Usually its value ranges from 1.5 to 4%.
What influences the amount of the margin?
The margin is set with the customer during the signing of the contract. Sometimes it is fixed, but it happens that its value changes depending on several factors, for example buying additional products in the same bank. For this reason it is not a fixed amount. Customers who have a positive credit history and have been customers of a financial institution for years can count on a much lower margin. This is because banks take into account the loyalty of potential borrowers and their creditworthiness.
The margin is a very individual issue that depends on the marketing policy of a particular bank. It happens, therefore, that some financial institutions offer favorable promotions, which are valid only for some time. After this period, its value is often increased. For this reason it is worth paying attention to this issue when signing an agreement with a bank.
Can the margin be negotiated?
Taking a credit is quite a complex process, therefore there is a possibility of negotiating some parameters of the obligation. The easiest is with the margin, which is set by the financial institution itself. So the client has the possibility of lowering the margin. The arguments for such a solution will be for example excellent creditworthiness or positive credit history.
In order to reduce the margin of a mortgage loan, it turns out that it is necessary to submit a special application. The bank will not always respond positively, but there is no harm in trying. The customer does not lose on such a solution, and can gain a lot. The whole interest rate is set by the Monetary Policy Council, but the value of the margin can be successfully negotiated.
However, the margin is not the only factor affecting the final cost of the loan. When choosing a given offer, it is necessary to pay attention also to the commission, possible expenses for early repayment of the obligation or the RRSO. For this reason it is necessary to think over your decision carefully and compare all offers available on the market, e.g. using online comparison services.