You have probably heard lenders and brokers alike refer to rate holds and rate locks. What exactly does this mean?
A Rate Hold is simply the amount of time that a lender will guarantee a loan’s interest rate. If you get pre-qualified for a mortgage today at a certain rate, then a lender will hold that rate for a given period of time, usually between 60 and 120 days. This means that even if rates go up, you are safe with the rate at which you were pre-qualified. In a way it is sort of like putting your rate on lay-away.
What happens if rates go down once you have had a rate held? No problem! If rates go down then we will automatically have you re-approved at the new lowest rate. The interest on your mortgage will reflect the lowest rate reached within the duration of your rate hold. This is why it is always a good idea to get pre-approved for your mortgage well in advance of purchasing a property.
A Rate Lock is a written agreement in which the lender guarantees the borrower a specified interest rate for a set period of time. Rate locks refer to closed terms. If you decide, for example, to get a five year term then your rate will be locked or guaranteed for the life of that 5 year term.