Definition: A discretionary rate is a specially discounted mortgage rate that a lender may offer to select borrowers, typically based on factors like negotiation, the borrower’s credit profile, or the borrower’s overall relationship with the bank. Discretionary rates are often lower than the lender’s standard posted rates.

How discretionary rates work

Lenders sometimes offer discretionary rates as a way to attract or retain clients, especially in a competitive market. These rates are usually available:

• For borrowers with strong credit scores and financial profiles.
• To clients who maintain multiple accounts or services with the lender, such as banking, investment, or credit products.
• During negotiations, where lenders may provide a discretionary rate to match or beat competitor rates.

Why discretionary rates are appealing

Discretionary rates can save borrowers money by lowering monthly payments and overall interest costs compared to posted rates. However, they are not always openly advertised, and borrowers often need to ask for them.

Tip: If you’re shopping for a mortgage, don’t hesitate to negotiate or inquire about discretionary rates. Working with a mortgage broker can also help, as brokers often have access to lenders’ lowest available rates.

Last modified: November 5, 2024