When interest rates are rising, it’s natural to want to hold or reserve the current mortgage rates until you can find the property that suits you. While that sounds like it should be simple, the actual process is a bit more complicated. There are some key things you should know when you are requesting a mortgage rate hold.
Mortgage lenders aren’t required to offer rate holds, and so not all of them do. Your file may only qualify with certain lenders, which would be another piece of the puzzle to solve. The good news is that with access to over 40 lenders, the Auxilium Team is well-positioned to find the solution that fits your situation and can give you peace of mind.
Lenders tend to advertise their best rates, which would be what you see when you look online or at your bank. However, there are always terms and conditions associated with any rate! In this case, the lowest rates are usually for a “live” deal or file – one that has a property attached and a closing date.
Some lenders will add a premium to a rate hold. That means the rate that’s being held is higher than what you would receive if you had a live deal at the time we submit it. However, you will have peace of mind in case rates do go up while you’re looking for the right property. If rates go down in the meanwhile, lenders will generally honour the best rate available when your file goes live: either the rate hold or the current rate, whichever is lower.
All lenders have a time limit on their rate holds. They’re not indefinite. Generally, a lender will hold a rate for either 90 or 120 days. That means you must find a property and close on it within the period of the rate hold.
With the housing inventory in Victoria still quite low, it may be difficult to find your new home with the added pressure of a deadline to get a rate that’s been held. If you can’t close within the timeframe of the rate hold that’s been secured, we’ll have to re-submit your file to a lender once you’ve found a property and it will be subject to the rates available at that time.
If you’re considering a variable rate mortgage, the good news is that those are still some of the lowest rates in the marketplace. However, lenders are only able to hold the discount portion of their variable rate – the amount that’s different from the prime rate.
The prime rate is influenced by the Bank of Canada and determines how expensive it is for banks to borrow money. So when the Bank of Canada announces a rate increase, prime rate follows.
If the prime rate rises during your rate hold period, your final interest rate will increase by the same amount. The difference between the prime rate and your final interest rate will stay the same as when we obtained the rate hold.
For example, if the prime rate is 3.20% and the discount on your rate hold is -0.95%, closing within the rate hold window would give you a final interest rate of 2.25%. If the prime rate increases by 0.25% during the rate hold but before you close, your final interest rate would be 3.45% – 0.95% = 2.50%.
Not all lenders underwrite their rate holds. That means that while they will give you the held rate for your file if you – and the property if it is an insured mortgage – qualify, they will only look at the supporting paperwork after your file goes live.
Auxilium always does a “hard” pre-approval when we submit your file. That means our broker team:
We work this way to provide you with as much certainty as possible. Our experienced mortgage brokers underwrite your file before submitting it to a lender. This way the process goes as smoothly as possible once you find a property and your deal is live.
Getting a mortgage rate hold can provide you with peace of mind. Now that you know the limits of what a rate hold can do, you can make an informed decision to reach your home ownership goals. You also know how the Auxilium Team can support you to secure your best rate.
If that sounds like the service you want for your mortgage financing, start a conversation with us today. Fill out our contact form or give us a call at 250-590-6520 (toll-free 1-855-590-6520) to see how we can find the best solution for your situation.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience. We work with dozens of lenders to help you meet your goals.
This post reflects the best available information at the time of writing/last update. In order to ensure that you have the most up-to-date information, contact us to confirm the details for your specific situation.