Rate Hold Blog - Mountain Mortgage Canmore - Carolyn (Caz) Withey - Mortgage Architects
A Mortgage Rate Hold is a term that all prospective home buyers should know and understand so you can decide if it makes sense for your purchasing goals. There are a few aspects to a rate hold, so learning more can help you to decide if this is worth considering for your particular situation or future plans.
The most important detail to keep in mind is that a rate hold can be put in place even before you know the exact property you want to buy! The purpose of a rate hold is to secure an interest rate on your mortgage application for a certain period of time. This timeframe varies based on the lender, but typically it ranges between 90-120 days. Generally there is a slight premium to securing a rate in advance, as the lenders don’t know how much of a rate rise may occur over the allotted timeframe, but even at a slight premium, when rates are on the rise, this option can give you some excellent security so you don’t feel pressure from the changing rates.
Let’s look at an example
How can a rate hold work to your advantage: On day one, your Mortgage Planner submits your application to a lender for a fixed interest rate of 2.79% and they agree to hold this rate for 120 days. On day 60 interest rates have risen to 3.24%, but you still have your rate hold locked in for another 60 days. As long as your mortgage closes in that time, you are protected and can keep your lower interest rate of 2.79%. Another important detail is that if rates happen to trend downward, you can still take advantage of the lower interest rates at that time.
So who can use this option?
Only those looking to purchase a home and establish a brand-new mortgage can use this tool. Even though rate holds are offered by the majority of lenders, they are typically not provided for anyone refinancing their current mortgage or looking to transfer their existing mortgage from one lender to another… though if a refinance or switch of an existing mortgage is your goal, please feel free to reach out as there are options to securing a rate early for this purpose as well.
What happens when the rate hold expires?
You’ve passed your allotted 90-120 day period and you haven’t found that perfect home fit just yet. Easy! There is nothing stopping you from submitting for another rate hold, it will just be subject to the current rates on the day of submission.
Do you have to use the mortgage lender you locked in a rate with?
No! You can change your mind about the lender you are using well before signing a mortgage agreement with them. A rate hold doesn’t commit you to working with that particular lending institution for your mortgage, though they may be the lower rate option if rates have risen above your locked in rate. But it’s still your choice who you place your mortgage with in the end. A rate hold is simply a useful tool to have a protected interest rate with one particular lender, just in case rates raise significantly while you are hunting for your perfect home! If rates have dropped before your mortgage is set to close, then there is always an option to take advantage of the lower rates at that time as well.
How do you set up a rate hold?
If this sounds like the right step for you then get started by submitting an application with your mortgage planner. As an Alberta licensed Mortgage Planner I’m happy to review this option with you to determine which lender and policy make the most sense for your specific scenario or home buying plans.
Don’t hesitate to reach out to get started on the pre-approval process, and locking in a rate before we see them rise more.
Carolyn (Caz) Withey - Mountain Mortgage
Mortgage Planner | Mortgage Architects