Frequently asked questions

A mortgage rate refers to the interest rate charged by a lender on a mortgage loan. It is the percentage of the loan amount that a borrower pays back in addition to the principal amount borrowed. Mortgage rates can be fixed, meaning they remain the same throughout the loan term, or adjustable, meaning they can change over time based on market conditions. The mortgage rate is a key factor in determining the overall cost of a mortgage loan and can have a significant impact on the borrower’s monthly payments and total interest paid over the life of the loan.

Whether a variable or fixed rate is better depends on your personal circumstances and risk tolerance. Here are some factors to consider:

Variable rate mortgages:

• Typically start with a lower interest rate than fixed rate mortgages, which could save you money on interest payments in the short-term.
• Can go up or down depending on changes in the lender’s prime rate or the Bank of Canada’s overnight rate.
• Are more unpredictable than fixed rate mortgages, which can make budgeting and planning more difficult.
• May be more suitable for borrowers who expect interest rates to stay low or who plan to pay off their mortgage quickly.

Fixed rate mortgages:

• Offer predictability and stability, since the interest rate stays the same for the entire term of the mortgage.
• May have a higher interest rate initially than variable rate mortgages, but provide peace of mind knowing that your monthly payments won’t change.
• Are better suited for borrowers who prefer a stable payment amount or who are worried about the impact of rising interest rates on their budget.

In general, if you are comfortable with the potential for interest rate fluctuations and want to take advantage of a lower initial rate, a variable rate mortgage might be a good option. However, if you prefer predictability and stability in your payments, a fixed rate mortgage may be a better choice for you. It’s important to consult with a financial advisor or mortgage professional to discuss your specific circumstances and determine which option is best for you.

To lock in a mortgage rate, you should follow these steps:

1. Apply for a mortgage with a lender of your choice and receive a mortgage rate quote.

2. Once you have found a rate you are comfortable with, ask your lender if they offer a rate lock option.

3. If the lender does offer a rate lock option, ask them about the terms and conditions of the lock, including the length of the lock, any fees involved, and what happens if rates go down during the lock period.

4. If you agree to the terms, request a rate lock and the lender will provide you with a document that outlines the terms of the lock, including the interest rate, length of the lock, and any associated fees.

5. Review the rate lock agreement carefully and sign it if you are satisfied with the terms.

6. Once you have signed the agreement, the lender will typically hold the agreed-upon rate for a specified period of time, usually 30 to 60 days, during which time you can finalize the mortgage process.

It’s important to note that a rate lock typically comes with a fee, which can vary depending on the lender and the length of the lock period. Make sure you understand the terms and costs associated with a rate lock before agreeing to it.

A mortgage rate hold, also known as a rate lock, is an agreement between a borrower and a lender that guarantees a specific mortgage interest rate for a certain period of time, typically 30 to 120 days. During this time, the lender agrees to hold the rate even if interest rates increase in the market.

A rate hold is useful for borrowers who are in the process of purchasing a home or refinancing a mortgage and want to secure a specific interest rate before it changes. It provides peace of mind and allows the borrower to budget and plan for their mortgage payments without worrying about interest rate fluctuations.

To obtain a rate hold, the borrower must typically provide a mortgage application and other required documentation to the lender. The lender will then review the application and determine if the borrower is eligible for the desired rate. If approved, the lender will issue a rate hold agreement specifying the rate, the length of the rate hold, and any associated fees.

It’s important to note that a rate hold may come with a fee, and the longer the rate hold period, the higher the fee may be. Additionally, if the borrower doesn’t close the mortgage within the rate hold period, the rate hold may expire and the borrower may need to pay a new fee to extend the rate hold or accept a new interest rate.

Mortgage rates can change frequently and can be affected by a variety of factors such as economic indicators, market conditions, and lender policies.

In general, mortgage rates can change daily or even multiple times a day, depending on how financial markets and economic indicators are performing. For example, major economic news or political events may cause mortgage rates to shift quickly in response to market changes.

While it’s impossible to predict with certainty when and how much mortgage rates will change, borrowers can monitor market trends and economic news to help gauge when to lock in a rate. Some lenders may offer rate lock periods that range from 30 to 120 days, which can give borrowers some protection against sudden rate increases while they complete the mortgage process.

Ultimately, it’s important to work with a reputable lender who can guide you through the mortgage process and provide you with up-to-date information on current rates and market conditions. Additionally, keep in mind that mortgage rates are just one factor to consider when choosing a mortgage, and other factors such as loan terms, fees, and closing costs should also be taken into account.