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Everything You Need to Know About Mortgage Rate Holds in Canada

February 23, 2023 | Posted by: Matt Broom-Hall

Everything You Need to Know About Mortgage Rate Holds in Canada

If you're planning to buy a home in Canada, you may have heard about mortgage rate holds. A rate hold is an agreement between a borrower and a lender to hold a specific interest rate for a set period of time. This allows the borrower to secure a rate in advance of closing on a property. In this post, we'll answer the top 5 frequently asked questions Canadians have about mortgage rate holds.

What is a mortgage rate hold, and how does it work?

A mortgage rate hold is an agreement between a borrower and a lender to hold a specific interest rate for a set period of time, usually between 60-120 days. The borrower is not required to accept the rate but can choose to do so before the rate hold expires.

A rate hold is a way for borrowers to protect themselves against interest rate fluctuations while they are shopping for a home. Interest rates can change rapidly, and a rate hold can help ensure a borrower gets their best rate. 

How long can I get a mortgage rate hold for, and is it free?

Mortgage rate holds can typically range from 60-120 days and are usually free of charge. You are also not obligated to use that specific lender once you have found your property.

It's important to note that the longer the rate hold period, the higher the interest rate may be. A shorter rate hold period may result in a lower interest rate but also gives the borrower less time to shop around for a home.

What happens if rates go down after I get a rate hold?

If rates go down after you get a rate hold, as your mortgage broker, we are able to negotiate a lower rate with that lender. Alternatively, we can review the marketplace and provide alternatives for you to choose a different lender that offers a lower rate.

It's important to note that if rates go up after you get a rate hold, you are protected from the increase. However, if rates go down, you are able to take advantage of the lower rate.

What happens if I can't close on the property before the rate hold expires?

If you can't close on the property before the rate hold expires, you will lose the rate hold. The lender will offer you a new rate hold based on current market conditions. 

How does the Bank of Canada's interest rate affect mortgage rate holds?

The Bank of Canada's interest rate can have a significant impact on mortgage rates, which in turn affects rate holds. If the Bank of Canada raises its interest rate, lenders may raise their mortgage rates as well, which could make it more expensive to secure a rate hold or get a mortgage.

If you have a rate hold and the Bank of Canada raises its interest rate before your rate hold expires, you may be able to keep your original interest rate if your lender honours the rate hold. However, if your rate hold expires and you need to apply for a new one, you may need to do so at a higher interest rate.

It's important to keep an eye on the Bank of Canada's interest rate if you're planning to get a rate hold or a mortgage. We can help you understand how changes in the interest rate may affect your situation and what you can do to protect yourself against rate increases.

In conclusion, mortgage rate holds can be an excellent way for borrowers to protect themselves against interest rate fluctuations while they are shopping for a home. However, it's essential to communicate with your mortgage broker throughout the process to ensure that you understand the terms and conditions of the rate hold agreement. By doing so, you can make an informed decision about your mortgage and ensure that you are getting the best possible rate for your situation.

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