RATE HOLDS / RATE LOCK
What is a Rate Hold / Rate Lock?
You may have already heard your mortgage broker or lender mention a Rate Hold or a Rate Lock, here are the differences between the two:
Simply put, a Rate Hold refers to the length of time a lender is willing to guarantee a specified interest rate. So, if you’re pre-approved for a mortgage loan today under a certain interest rate, the lender will “hold” that rate for you for a designated period of time, generally between 60 and 120 days.
This is ideal for homebuyers who can rest assured that their interest rate will remain the same as the amount they were pre-approved for (so long as they purchase a home within the 60 -120 day period). Even better, if rates go down during that time, home buyers are eligible to be re-approved for the new, lower rate.
Throughout the duration of your Rate Hold, the interest on your mortgage loan will always reflect the lowest rate reached (this is why it’s important to get pre-approved before you head out house hunting).
Similar to a Rate Hold, a Rate Lock is a written guarantee from a lender, approving the borrower for a specified interest rate over a designated period of time. However, Rate Locks refer to closed mortgage terms (i.e. if you sign up for a five-year term, your rate will be “locked-in” for the following five years).