Maximize Savings, Minimize Risk: The Rate Locking Formula

By Dylan Suitor

My true passion is to create generational wealth; generational wealth for my family, my future family, for my friends and of course for our clients. Whether you are a first-time or seasoned investor, looking for single family investments, duplexes, tri-plexes etc, multi-family investing, student rentals, vacation homes or a rent to own. I can assist you in getting started and teach and guide you on how to grow your own portfolio. I have focussed much of my attention over the last few years really understanding the process involved, in order to best serve you, our client.

Understanding the intricacies of rate locking in real estate transactions is crucial for both residential and commercial buyers. It’s a strategy that can safeguard against unexpected interest rate fluctuations, providing stability and certainty during property acquisitions. Today, I’ll delve into the significance of rate locking, offering insights and practical advice on how you can leverage this tool effectively.

For residential buyers seeking a home for their family or personal use, banks often offer rate locks for up to 120 days. This means that if you apply for a mortgage today, you can secure a fixed mortgage rate for a purchase within the next four months. The terms and rates you lock in remain unchanged when you finalize the purchase of your home. It’s crucial not to let the rate lock expire; therefore, it’s advisable to seek a mortgage within the 120-day window before acquiring the property.

It’s wise to consult a mortgage broker as you approach the 120-day mark or anticipate an announcement about an increase in mortgage rates or changes by the Federal Reserve. Reconnecting with your mortgage agent or the one we can refer you to will enable you to extend the rate lock for another 120 days. One of the significant benefits of rate locking is the assurance that once you’ve secured a rate, it cannot be altered or revoked.

In the commercial realm, certain lenders maintain their funding pools. They might offer long-term rate locks at a slightly higher premium of around 15 to 20 basis points. This longer lock-in period, up to 12 months, might involve a more extended application process, whether you’re utilizing CMHC or conventional financing. However, paying this premium secures your rate for a more extended period. For instance, I recently locked a rate for an apartment building at the lowest January bond yield for ten years. Despite the Bank of Canada’s announced rate increases during that period, I retained that mortgage rate.

At Elevation Realty Network, we have extensive contacts and expertise in navigating mortgage locking intricacies. Don’t hesitate to call or email us for guidance tailored to your unique situation. Whether you need assistance from me or our exceptional team, we’re dedicated to assisting you and your family in achieving your next real estate goals.