Understanding Rate Holds and Their Importance in Mortgage Planning

When it comes to navigating the intricate landscape of mortgages, a term that often surfaces is ‘rate holds.’ These holds provide a valuable tool in the realm of mortgage planning, offering a safeguard against potential interest rate fluctuations. In this blog post, we’ll go over the intricacies of rate holds, shedding light on how they work and why they can be instrumental in securing a favourable mortgage deal.

The Basics of Rate Holds

At its core, a rate hold allows you to secure a specific interest rate for a predetermined period. This period typically spans between 60 to 120 days, depending on the lender. The duration can vary based on whether you’re engaging in a purchase or a refinancing process.

Expired Rate Holds

Once the rate hold period lapses with a particular lender, you have the option to request a new rate hold, this time reflecting the new rates.

Anticipating Future Rate Movements

Rate holds become especially beneficial when you foresee a potential uptick in interest rates. As rates climb, they can impact your purchasing power, as you must now qualify at a higher rate. With stress tests factored in, you need to qualify at the greater of the contract rate plus 2% or 5.25%.

Lender Variations on Rate Holds

Lenders have varying approaches to rate holds. Some are quite lenient, holding their entire rate sheet for all available options. Others, however, tie the saved rate to the specific deal, rendering any alterations to the agreement null and void. Occasionally, some lenders also charge a rate premium on rate holds.

Seizing Opportunities During Rate Holds

Should interest rates decrease within the rate hold period, you can initiate a request to update the hold with the lower, more favorable rate.

The Reality Check on Rate Holds

While a rate hold secures a particular rate, it’s important to note that this doesn’t guarantee eligibility (the lender will still need to underwrite your file) or commit you to that specific option. It serves as a safeguard against potential rate hikes, allowing you to explore your mortgage options with greater confidence.

Real-World Example of Rate Hold’s Impact

Illustrating the power of rate holds, consider a scenario a few months ago, where I secured a 4.79% interest rate on a 3-year fixed mortgage, at a time where the current rates were going well over 5%.

Taking Action: Rate Holds and Pre-Approvals

If you’re thinking about securing a mortgage in the coming months, it’s not just advisable, but crucial, to consider a rate hold. At the very least, it provides a safety net against potential rate hikes. Ideally, a pre-approval would be even better in this context.

In conclusion, navigating the ever-shifting landscape of mortgage rates demands careful planning and strategic decision-making. Rate holds emerge as a powerful tool in your arsenal, offering protection against market volatility. If you’re gearing up for a mortgage in the near future, reaching out to me secure a rate hold, or better yet, a pre-approval, as it could be the pivotal step that sets you on the path to a favorable mortgage deal.