With mortgage rates continuing to stay low and plenty of competition in the mortgage market in Calgary and High River, it may seem like you’re pretty much guaranteed a good rate no matter where you go. The truth is not that simple, however. Interest rates fluctuate daily, and the home buying process can several take months. Many people don’t realize that when they are pre-approved for a mortgage they are not necessarily “locked in” to the offered interest, and while their real estate deal takes place the market and the proposed rate could change dramatically.
While a slight climb in rates between the time you get your first rate quote and when your home’s escrow finally closes might only mean a few dollars more on your monthly payment, when you amortize that out over the life of your mortgage, even an increase as small as one-quarter percent could cost you tens of thousands of dollars – especially given the price of property in Calgary and High River. The best way to get the lowest possible mortgage rate is to work with your broker throughout the pre-approval process and lock in s soon as possible.
What is” Locking In”?
When you began the pre-approval process, your broker provided you with an initial rate quote. It is important to remember this quote is just an estimate and you are not guaranteed that rate. When you lock in to a rate, your lender is promising under law to provide a specific mortgage rate for the agreed term of your mortgage. With rates currently low, locking in to a is the best way to guarantee you won’t end up paying more should your real estate deal be unexpectedly delayed.
Know When to Lock In
As a homebuyer, you know finding a home can take months, and once you have found the right one, the buying process can, depending on circumstances, take several months more. If you lock in too early and haven’t closed before your rate expires, you could end up with a higher rate. Your mortgage broker should be able to tell you how long it usually takes to process a loan in your area, so you can decide when you should lock in your rate.
Usually, it is possible to lock in a rate any time after you decide upon a home up until five days before escrow closes, but buyers need to be aware that rate locks are only valid for a specific period of time. It’s also important to know that you might need to pay a fee to lock in your mortgage rate for a longer term. Some lenders don’t charge to lock in for shorter terms (usually thirty days or less), but beyond that, there is frequently a fee, typically between ¼ and ½ a point) that can be added to the total loan amount. Be sure to understand the time limits and any fees involved before you lock in your rate.
No matter where you are in the home buying process, if you haven’t spoken to a broker, now is the time to make sure you are fully informed, so you can get the best possible mortgage terms. To learn more about current rate trends read “Best Mortgage Rates for Calgary, Okotoks and High River”.
Get it in Writing
Your rate lock is a legally binding document that indicates the loan amount, the mortgage interest rate, and any fees or points. It should also include your name, the lender’s name, the date the lock begins, and the date it ends.
Your agreement might also include a rate cap. This means that while your rate is locked in, if interest rates increase, the lender might offer you a rate that is slightly higher but below a set limit. Look for a rate cap that goes no more than ¼ per cent above your agreed-upon rate. As always, read the fine print to make sure you understand any exceptions that might nullify the agreement.
All buyers expect to negotiate as part of the home buying process. While we typically think in terms of offers and counteroffers on a property, also expect to negotiate before you lock in to your mortgage rate. There is nothing wrong with asking that your letter of commitment include a “float-down” option in case interest rates go down after you lock in. This might not be an option with your lender, or there might be a fee, but it is another way to get the lowest Calgary and High River mortgage rates.
No matter where you are in the home buying process, sound advice from an experienced professional is key. Don’t risk paying a higher rate simply because you weren’t well informed. By locking in at today’s low mortgage rates, you can enjoy the current low rates for years to come. To learn more about how to lock in your rate contact Mortgages by Candice today for a free, no-obligation consultation.