Table of Contents
One of the most important factors when buying a home in Canada is the interest rate on your mortgage. With interest rates constantly changing, estimating how much you can afford to spend on your new home can be challenging. This is where a mortgage rate hold might come in handy.
Here’s what you need to know about mortgage rate holds and how they work.
What Is a Rate Hold?
A mortgage rate hold is the term used by a mortgage lender to lock in the offered interest rate for a specific amount of time. Rate holds vary by lender. In Canada, they typically range from 90 to 130 days. Rate holds are only applicable on fixed mortgages, not variable mortgages.
Featured Partners Offer
1
nesto Inc.
Mortgage refinancing service
Yes
Mortgage rates
Lower than the national average
Days to close
10
2
Bank of Montreal (BMO)
Mortgage refinancing service
Yes
Mortgage rates
About the same as the national average
Days to close
18
How Does a Rate Hold Work?
Individuals shopping around for a home can approach a lender and request a rate hold. Assuming you qualify, you will have a specific amount of time (varies by lender) to find and purchase a home to lock in that rate.
A rate hold does not guarantee that you will buy a home or even use that lender when you do. It also does not guarantee that you will be approved for the mortgage if you do find a home you wish to purchase.
Rate holds can be beneficial during volatile times when interest rates fluctuate regularly. If interest rates increase, you don’t need to worry, as you have your guaranteed rate locked in. However, it can also be tricky in a very competitive market, as you have only the allotted time to find a home to keep that guaranteed rate.
Rate Hold vs. Preapproval
Rate holds lock in the interest rate for a specific amount of time, which can be very helpful. However, it’s not a guarantee that you will be approved for a mortgage.
Preapproval, on the other hand, is a more rigorous process in which the lender reviews your finances, credit history, etc., to determine whether and how much they will approve you for a mortgage. If you have been pre-approved, you will receive a document stating how much of a mortgage you qualify for and the rate. Applying for preapproval before shopping for a home can help give you peace of mind if you are worried you might be denied.
Related: Five Things You Need To Be Preapproved For A Mortgage
Pros and Cons of Rate Hold
Pros:
- Not a commitment
- Gives you some time to shop around
- Locks a rate into place for a certain period of time, protecting you if rates increase
- You can reapply for a rate hold should interest rates drop
Cons:
- Not a guarantee you will be approved for a mortgage
- Only available for fixed rates
- Only guaranteed for a certain amount of time
Rate Holds Offered by Lenders
Rate holds tend to vary from 90 to 130 days. Here’s what some of the most popular lenders in Canada offer.
- TD Bank: 120 Days
- BMO: 130 Days
- RBC 120 Days
- Tangerine: 120 Days
- CIBC: 90 to 120 days
- Desjardins 90 Days
- National Bank 90 Days
Things To Note With A Rate Hold
- Rate holds are not a commitment. If you find a home you wish to purchase, you do not need to stay with that lender.
- You can reapply.While rate holds can protect you against interest rate increases, remember that rates can also go down. In this case, you can just reapply.
- Rate holds do not guarantee approval for a mortgage. If you are concerned about mortgage approval, you might want to consider a preapproval instead.
Featured Partners Offer
1
nesto Inc.
Mortgage refinancing service
Yes
Mortgage rates
Lower than the national average
Days to close
10
2
Bank of Montreal (BMO)
Mortgage refinancing service
Yes
Mortgage rates
About the same as the national average
Days to close
18
Frequently Asked Questions (FAQs)
What is a 120-rate hold?
A 120-rate hold means that the rate offered to you is guaranteed for 120 days.
Can you get a rate hold on a refinance?
No, rate holds are for new home purchases only.
Is a rate hold the same as a refinance?
No, a rate hold locks in an interest rate for a specific amount of time when you are looking to purchase a home. A refinance is when you want to renegotiate your current mortgage agreement. It is typically done at the end of your mortgage term.
Is a rate hold the same as a preapproval?
No, a rate hold only locks in the interest rate but does not guarantee approval for a mortgage. If you are concerned about not being approved, you can apply for preapproval.
