Mortgage Rate Holds in 2022
A mortgage rate hold allows you to request a reservation on an interest rate for a stated period, while renewing, refinancing, or applying for a mortgage. Mortgage rate holds give prospective homeowners the ability to get the best mortgage rate available, if interest rates were to increase.
If interest rates go down while you are locked into a mortgage rate, you won’t be able to get a lower rate with the same lender unless you have a float-down option. A float-down option gives borrowers the opportunity to take advantage of lower interest rates if you’ve already locked your mortgage rate.
How to Get a Rate Hold
There are many options to lock in your mortgage rate when it comes to refinancing, renewing, and applying for a mortgage purchase. You can:
- Get a rate hold through a bank directly or through a mortgage broker. If you’ve already decided on a bank that you want to use, moving forward with them by requesting a rate hold through them.
- Go through a mortgage broker, which can give you more options to find the right fit for you.
Going through a mortgage broker
Choosing to go through a mortgage broker not only gives you more options to get an interest rate that best fits your needs, but it also helps you as the client better understand the market, on what may be happening with interest rates in the near future.
Going through the bank
Choosing to go through the bank limits your options but is also another great way to secure a request for a rate hold. Although you can’t unlock your rate, you still have an option to request a float-down from your lender. If you’re wanting to request a float-down, you’ll have additional costs that will need to be paid.
A float-down provision or float-down option is an agreement between you and your lender that can be made after you lock in a rate. You’ll have to pay an additional fee — usually 0.5% to 1% of the loan amount — to drop your locked-in rate to current mortgage rates. For example:
- a float-down provision on a $300,000 loan would likely cost around $1,500 (0.5 percent of the loan amount)
The amount your rate will be reduced depends on the current market and your qualifications as a borrower. Note that you don’t pay this fee at the time of the float down. Rather, it’s rolled into your closing costs.
Do I Have to Lock in a Rate?
It’s not necessary for you to lock in a rate, but it’s a good idea to put in a request before rates drastically increase. With that being said, having a secured rate on hold, gives you the security needed if rates were to increase in the next week. The average person closes their mortgage in just 45 days. For most, a longer rate hold is the best options as it offers:
- Flexibility for those with closing dates in the distant future
- Pre-approval borrowers who are taking extra time to find a purchase
You can secure your rate hold request for 30, 45, 60, 90, and 120 days. This being said, if rates go up within the time you’ve requested your rate hold, you’ll be guaranteed you requested rate up to 3 months.
It is PARTICULARLY important to have a clear understanding of the implications when it comes to requesting a rate hold and securing your interest rate. It makes a significant difference in future planning and can impact you in incredibly substantial ways.
At GLM Mortgage Group, we know what questions to ask. We have relationships with the lenders that you know about and the lenders you don’t. We would be pleased to educate you on the financial options available to you. We want you to make the best decision possible on the mortgage that you are committing to. Call us anytime for a FREE consultation on the mortgage products available to you.