7 Aug 2015
The Value of a 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 preapproved rate.
For instance, if you obtain a 2.69% rate hold and there is a shift in the economy that forces the bond yields to rise, fixed rates could easily jump closer to 3.00%. In this case, your rate hold for 2.69% would have saved you more than a quarter of a percentage point, which would translate to a savings of a significant amount of money over the term of your mortgage.
Keep in mind, however, that a rate hold is only half the battle and means nothing if you don’t meet the lender’s qualifications when you have an accepted offer and your deal is now “live”. This is where an actual pre-approval comes in. Only a handful of lenders will actually look at the fine details of your employment and banking history without an accepted offer in place. Fact of the matter is, in the past only less than 15% of all pre-approvals actually turned into funded deals. Most lenders realized that they were wasting too much time and resources by pre-approving applicants that would never turn in to a customer.
Thankfully your Dominion Lending Centres Mortgage Professional will know which lenders still fully underwrite pre-approvals and which ones simply offer a rate hold. If you are able to obtain a preapproval AND a rate hold, you can be confident you have access to mortgage financing and you’ll know how much you can spend before you head out shopping for a property.