There are a few things that are as unstable as a mortgage rate. It is a factor that can change within a day or even an hour. And because of this fluctuating nature of mortgage rates, the stress level of most homebuyers dials it up to eleven. Homebuyers worry that by the time they close on a perfect MLS listing Ajax that they found today, the current favourable rates might shoot up.

This leaves many buyers wondering “Can we hold the mortgage rate steady till the time we seal the deal on the home?” Well, the good news is that you can do this while buying the Ajax home with the “mortgage rate lock feature”.

Scroll down below to learn more about this option when buying a home!

What Is the Mortgage Rate Lock Feature in Home Buying?

When buying a home in Ajax, you may come across the term “mortgage rate lock feature.” Under this feature, you can lock in the interest rate for the home loan for a set period while you’re finalizing the purchase of your new home. So, basically, you’re securing the current interest rate, meaning the loan rate won’t change even if the rate goes up before your mortgage closes.

Thus, the rate lock feature protects you from rising interest rates, giving you peace of mind when sealing the deal for the MLS listing in Ajax. However, keep in mind that you won’t be able to keep the steady rate in your hand for an infinite time.

This is because mortgage rate locks often come with time limits such as 30, 60, or 90 days. If the closing process of the home takes longer than this decided time, you might get the option to extend the lock feature.

Are There Any Fees to Keep Your Mortgage Rate Locked?

Typically, you do not have to pay any fee to take advantage of the rate lock feature in your home loan. However, some lenders might charge a small fee to secure your mortgage rate for a specific time. This fee can be a fixed amount of money or a small percentage of your total home loan.

However, if you need to extend the rate lock period because you’re unable to close on the home as quickly as expected, you may have to pay an extra charge. Lenders often levy an extension fee for the mortgage rate lock feature. These extension fees can vary depending on how long you need to extend the rate lock.

Here is another feature of mortgage rate lock you must know about when buying an Ajax MLS listing and that is the “float-down” feature. The float-down option allows you to take advantage of lower rates if they become available after you have locked in the rate. But as you might expect, the float-down feature comes with an extra fee or a slightly higher initial rate.

When Can You Apply for the Mortgage Rate Lock During Home-Buying?

You can apply for the mortgage lock feature in these two times -

1. Right after you get pre-approved for the mortgage, you can consider a rate lock. Locking in your rate early can protect you from potential rate increases and give you a clearer picture of your monthly payments.

2. During the final loan application process, you can also apply for a rate lock after you have found the perfect MLS listing in Ajax and want to proceed with the purchase.

Steps to Follow to Lock in a Mortgage Rate While Buying a Home

• When applying right after you get pre-approved for the mortgage

1. Pre-Approval

As stated already, you can apply for the mortgage rate-lock feature after getting the loan pre-approval letter. Once pre-approved, you can discuss the option of mortgage rate lock with your lender. Most mortgage lenders in Canada usually offer the rate lock feature to borrowers.

2. Choose the Right Rate Lock Option

• Fixed-Rate Mortgage: In a fixed-rate mortgage with a rate lock, you secure the specific interest rate for the entire loan term. For example, if you lock in a rate of 4% for a 5-year term, that rate stays the same for the entire 5 years, regardless of market fluctuations.

Rate lock periods in a fixed-rate mortgage usually last from 30 to 90 days. This period allows you enough time to find an MLS listing in Ajax and seal the deal.

• Variable-Rate Mortgage: For a variable-rate mortgage, you lock in the rate for a specific period but note that the rate is linked to an underlying benchmark rate which can change. For example, you lock in a rate of 4% only for the next 60 days.

Rate lock periods in a variable-rate mortgage also typically last for 30 to 90 days. But in a variable rate mortgage, your loan rate might adjust if the benchmark rate changes after you close the loan.

3. Finding a Home

With your mortgage rate locked, you can confidently look for your dream home in Ajax. Use this time wisely to find an Ajax MLS listing that fits your needs and budget.

4. Making an Offer and Closing

Once you find the perfect home and your offer is accepted, you’ll need to complete the final mortgage process with the lender and all the other closing steps. If your mortgage gets approved, you can successfully buy the home at the rate you locked during the pre-approval.

• During the final loan application process

The steps to lock in a mortgage rate during the final loan application process are almost the same as outlined above. However, in this scenario, you start looking for a home after receiving the mortgage pre-approval without locking the rate. This means as you search for your home, fluctuations in interest rates could impact your loan rate.

Once you find a home and your offer gets accepted, you move forward with the final loan application. It is at this stage that you will choose to lock in the rate for the home loan. Now, you must choose between fixed-rate and variable-rate mortgages for buying the MLS listing in Ajax just as mentioned above.

Is It a Good Idea to Lock in an Interest Rate Now When Buying a Home in Ajax?

On June 24, the Bank of Canada lowered its key interest rate to 4.5%. This was the second rate cut in a row, following a similar cut last month. Before that, the central bank hadn’t sliced rates since March 2020. If inflation continues to climb down as expected, there’s a good chance that the Bank might lower the rate further in the near future.

Given these recent developments, it might be wise to wait a bit before locking in your mortgage rate. The chance of further rate cuts could mean you could afford a bigger, better MLS listing in Ajax if you hold off a little while.

However, the correct answer to whether you should lock in a rate now or not depends completely on your financial situation and personal circumstances. If the current rate fits well within your budget and you do not want to delay your homeownership plan, you can consider locking in the rate. But in case you’re unsure about all this, consult with a mortgage advisor to figure out the best time and way to buy a home in Ajax.