Mortgage pre-approval very important when interest rates are rising

I am a big fan of mortgage pre-approval — in any interest rate climate. Even when mortgage interest rates are steady or falling. And doubly so when rates are creeping upwards, as we have seen in the past several months.

Why?

Because the pre-approval will hold an interest rate for you while you continue to shop or make up your mind about refinancing your home. Even if rates rise a full percentage point, your rate is protected for 120 days. That is some pretty serious peace of mind.

With three Bank of Canada rate increases since the summer of 2017, variable rate mortgages are sitting at 0.75% higher than in their glory days, and five-year fixed rate mortgages are rising with the tide as well.

Last year, home buyers were expecting a mortgage rate of around 2.39%, whereas today they are anywhere from 3.09% to 3.59%, depending on the down payment, etc.

How do you know if you are in the pre-approval “zone”?

Quite simply, a mortgage pre-approval can be used to:

  • Purchase a home
  • Refinance your current home
  • Renew your current mortgage (at time of renewal)

A note on renewals

If your mortgage is coming up for renewal in the next several months, you can expect to hear from your mortgage lender sometime soon. It used to be they would send you a letter spelling out your term and rate options — inviting you to select the one you like best, and return the form.

More often these days, renewing lenders are not putting their rate offers on paper — since it gives you carte blanche to shop the rate around for something lower and better. Instead the trend is to invite you in for a friendly little office chat… probably with coffee, so that part is good.

Either way, this is a perfect time for you to dip your toes again into the market and see what else is out there. Plus, you can lock up a rate for 120 days with a pre-approval while you do your shopping.

Then if rates do spike upwards around your renewal date, you can take comfort that you have a killer rate already in your back pocket. Sweet!

The takeaway

Even with a small rate bump from 3.24% to 3.59%, a pre-approval can save over $5,400 in monthly payments for a $500,000 mortgage! No small potatoes!

So, if you are thinking of buying a home, your mortgage is coming up for renewal, or maybe you want to
refinance your mortgage, it makes sense to give us a call at AskRoss.

For your free copy of our Pre Approval Primer, click here

If you want to lock in current rates, here is a link to our online mortgage application

Here is the story of clients who saved thousands last summer

Financial Literacy Leader of the Year Award 2017 Crest
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