Hi everyone, Aleem here with the Mortgage Centre.
Today I’d like to touch upon our current interest rates, and specifically why you get a different rate on a pre-approval than you would on a live deal.
Increasingly popular with the lenders are specials called quick closes available to you if you are purchasing and have a contract in place (i.e. the deal is live) and closing within 30 to 45 days.
A “pre-approval” or rate hold, on the other hand, some of my lenders are currently offering 3.59% on a 5-year fixed. So that rate is guaranteed for a period of 90 to 120 days.
Should rates sky rocket upwards between now and the next four months, you are protected because you have a rate guarantee of 3.59%.
Now if you go to our site, or subscribe to our rate watch, you will undoubtably notice rates such as 3.29% being advertised. I can guess that you are probably saying, because i have been asked this before “Why aren’t you not holding the 3.29 for me?” Well, that’s because it is a promotional rate, which is not available on pre-approvals and certain conditions apply.
Most lenders right now only issue pre-approvals at a slightly higher rate than perhaps their absolute lowest or best rate.
Why? you may ask. Well, the stats show that a good number of pre-approvals don’t actually amount to anything. The banks do incur costs to issue rate guarantees on a pre-approval. They have to hedge against possible interest rate increases during this period of the rate guarantee, something they are not required to do when you have got a live deal. There is a little more certainty in the case of a live deal in that they know exactly when the mortgage is closing and so their costs are fixed. Also, the probability of a live deal closing is far more likely, so for these reasons, the lender can give a slightly better deal.
The moral of the story: even if we’ve got you pre-approved at a rate, we may be able to do a little better when you actually write a deal or when you pull the trigger on your refinance.
Be sure to find out if the rate that you are getting is the best rate that you can get or is the best rate we can get as a pre-approval.
There is a difference, but rest assured we will always give you the lowest possible rate with the best terms that suit your needs when your deal goes live. For the Mortgage Centre, I’m Aleem Peermohamed