Mortgage Basics

Mortgage Rate Lock

Mortgage Rate Lock
Written by
  • nesto
| Jun 22, 2022
Reviewed, May 8, 2024

Table of contents

    A mortgage rate lock allows you to reserve an interest rate for a set period while renewing, refinancing or applying for a mortgage. Mortgage rate locks give prospective homeowners the ability to get the best mortgage rate available in the event that interest rates increase. At nesto, we can lock in a rate for up to 150 days.

    However, if interest rates go down while you are locked into a mortgage rate, you won’t be able to get a lower rate with the same lender unless you have a float-down option. A float-down option lets you take advantage of a better rate if interest rates go down during your rate lock period. 

    Key Takeaways

    • A mortgage rate lock lets you hold an interest rate for a set period of time, usually up to 120 days.
    • Locking in your mortgage rate protects you if interest rates rise.
    • With some lenders in Canada, a mortgage rate lock means that you will have to abide by your locked rate if interest rates fall during your rate-lock period.

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    Why Do Mortgage Rates Change?

    A number of different factors affect mortgage rates, including government fiscal policy and market forces. Among the main influences on mortgage rates are:

    • Fiscal policy and the key policy rate. The government sets its key policy rate, otherwise known as the target overnight rate, eight times a year. This is the rate at which the Bank of Canada lends money to major banks, which in turn affects their mortgage rates for consumers.
    • Bond yields. Five-year fixed-rate mortgages are one of the most popular mortgage terms available. In general, these products follow the trend of 5-year government bonds, with an additional 1-2% spread on top of the bond rate.
    • Market demand. When demand for homes increases, mortgage demand follows, and interest rates typically increase. Conversely, if demand for mortgages drops, interest rates typically follow to incentivize borrowing.

    How to Lock In Your Mortgage Rate

    Locking in your mortgage rate with nesto is a simple process, from getting a quote to final approval. Here’s a quick rundown of what you need to do to lock in your mortgage rate with us.

    • Create an account: First, start by setting up your nesto account
    • Find the right mortgage rate for you: Then, check out the best rates available in your province for both fixed and variable-rate mortgages. Once you’ve found a rate you like, select it and continue to get a quote.
    • Talk to an advisor: Once we have the details we need for your quote, we’ll call you. One of our licensed mortgage advisors will help us understand your situation and go through the steps needed to see whether you will likely get approved for the rate you want to lock in.
    • Lock-in your mortgage rate: After talking to an advisor who has confirmed your eligibility, you can lock in your rate for up to 150 days.
    • Check your approval status: Periodically log in to your account to see whether you’ve been approved. It usually takes us 2 to 5 days to confirm whether an application is successful.

    Frequently Asked Questions

    How much does it cost to lock in a mortgage rate?

    Nothing. However, choosing not to lock in your rate could cost you thousands if you end up paying a higher interest rate elsewhere.

    What if I lock in a rate, and it goes down?

    When you lock in your rate with nesto and rates drop, you’ll have the chance to get the lower rate. Choosing to lock your rate with nesto is designed to protect you from rate hikes, not punish you if they fall.

    Does a rate lock mean you are approved?

    No. Locking in a rate simply holds a rate that you will still need to be approved for a set period of time. We still need to complete your approval process, including underwriting the loan and ensuring you meet your mortgage’s conditions before it is finally approved.

    Does my loan type affect the mortgage rate lock?

    Several different factors can impact your rate, like the type of transaction, your credit quality, and your loan-to-value ratio (i.e., what proportion of your property will be covered by a loan rather than a downpayment or equity that you own yourself). To help you through the rate lock process, one of our mortgage advisors will discuss these criteria with you prior to fully launching your application.

    Final Thoughts

    Ultimately, locking in your mortgage rate is a good way to secure the lowest rate possible for the home you want to buy. At nesto, we can help you lock in a rate for up to 150 days, and you’ll be covered if rates go down as well. A rate lock doesn’t guarantee you’ll be approved for a loan, as you’ll still need to pass all of the mortgage approval guidelines, such as your income, credit, debt ratios, and more. However, a rate lock is the best way to secure the lowest rate possible should you go on to get approved for a mortgage.

    Given that interest rates and home prices are still climbing in Canada, now is the best time to get in touch and talk to us about locking in your mortgage rate.

    How nesto works

    At nesto, all of our commission-free mortgage experts hold concurrent professional designations from one or more provinces. Our clients will receive the best advice and care when they speak with specialists that exceed the industry status quo. 

    Unlike the industry norm, our agents are not commissioned but salaried employees. This means you’ll get free, unbiased advice on the most suitable mortgage solution for your unique needs. Our advisors are measured on the satisfaction and quality of advice they provide to their clients. 

    nesto is working hard to change how the mortgage industry functions. We start with honest and transparent advice, followed by our best rates upfront. We can offer you these low rates using the fintech industry’s best-in-class and safest technology to provide a 100% digital online experience and process to reduce overhead costs.

    By working remotely across Canada, all our mortgage experts and staff spend less time commuting to work and more time with their friends and family. This makes for more dedicated employees and contributes to our success with happy and satisfied clients.

    nesto is on a mission to offer a positive, empowering and transparent property financing experience, simplified from start to finish.

    Reach out to our licensed and knowledgeable mortgage experts to find your best mortgage rate in Canada.

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