What are Rate Holds?

General William Douglas 16 Dec

You May Have Heard of the Term “Rate Holds”.

Lenders offer rate holds to potential clients purchasing a new property who need a mortgage.  Rate holds are not used for refinancing a mortgage or transferring it from one lender to another.

Lenders will typically hold a rate for 120 days.  However, some lenders will hold the rate for a shorter period of time.  Each lender offers different options and a Mortgage Broker can walk you through the different options that are best for you.

What Does a Rate Hold Mean

A rate hold does not commit you to work with that particular lender.  It does not influence your chances of receiving an approval down the road.  When lenders offer a rate hold, they do not collect your documents or confirm that you will qualify for the amount of mortgage requested.  It simply holds the rate.  If a lender or Mortgage Broker collects and verifies your documents it is called a “Pre-Approval”.

The Way Rate Holds Work

  • Mortgage Broker submits your application to a lender for a fixed interest rate of 3.59% for 5-years with a 120-day rate hold.
  • 30 days later, that interest rate moves to 3.69%. As long as your mortgage closes in the next 90 days (within the 120-day window from when you got your rate hold), you can keep your 3.59% rate.
  • If rates go down, not up, you can also take advantage of the lower interest rate.
  • Once the 120 days expire, you can submit another rate hold.  It will be for the interest rate on the day of the new submission.

Best Choices

In my opinion, there is more value in a complete pre-approval in which a Mortgage Broker will verify all of your documents and also get you a rate hold.

If you are interested in relocating to Easter Ontario, I’d be happy to look at your mortgage options with you.

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