What is a Rate Hold / Rate Lock?

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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:

 

Rate Holds

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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.

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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.

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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).

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Rate Locks

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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).