The Value of Rate Hold
Securing a rate hold is like having insurance on your mortgage rate – you no longer have to worry about mortgage rates increasing while you find your new home over the next 90-120 days. And if rates drop within that same period, so too will your pre-approved rate.
For instance, if you obtain a 3.75% rate hold and then global risks subside and the economy strongly recovers over the next three to four months, that 3.75% could easily jump to 4.50% or higher. In this case, your rate hold for 3.75% would have saved you three-quarters of a percentage point, which would translate to a savings of a significant amount of money over the term of your mortgage.
But a rate hold means nothing if you don’t meet the lender’s qualifications. By working with me to obtain a pre-approval and a rate hold, you can be confident you have access to mortgage financing and you will know how much you can spend before you head out shopping for a property.
It’s important to note, however, that there is a significant difference between being pre-
approved and pre-qualified. In order to obtain a pre-approval, the lender fully underwrites the deal, whereas with a pre-qualification only the most basic details are considered. Remember that many banks will only issue a pre-qualification.
There are several reasons why you may want to secure a rate hold, including when you:
•Are thinking of buying a home in the next four months
•Are considering locking in your variable rate to a five-year fixed if rates rise, but your lender won’t hold a good rate for you
•Are casually thinking of refinancing but prefer to wait for fixed rates to rise so that your interest rate differential (IRD) penalty falls
•You want to hold a rate on a different term than you were pre-approved for by a different lender
As always, if you have any questions about rate holds, pre-approvals or your mortgage in general, I’m here to help!
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Online mortgage calculators are helpful in planning for a home purchase. For more information on CENTUM broker negotiated rates, visit Centum.ca for a referral to your nearest broker.
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