Locking in a mortgage rate means your lender guarantees you a specific interest rate for a set period, typically between 30 to 120 days, while your home loan is being processed. This can protect you from rising interest rates before your mortgage is finalised.
However, it’s a double-edged sword. If rates drop during your lock-in period and your lender doesn’t offer a rate drop or float-down clause, you could miss out on potential savings.
That’s why it’s essential to get personalized guidance from a trusted mortgage broker in Red Deer, Alberta—someone who understands both the national economic landscape and local housing trends.
What Does It Mean to Lock in a Mortgage Rate?
When a client applies for a mortgage, they receive a quote for an interest rate. However, until you lock the rate, it can change anytime. It is essential to lock the mortgage rate because lenders can agree to hold that rate for some time. It is commonly for 30, 60, 90 or 120 days while the loan is being finalised.
The lock-in protects the rate from increasing at any time. However, if any rates drop suddenly, then you cannot take advantage of the lower rate. Because here your lender offers a “float-down” option.
Current Economic Landscape
With inflation remaining above target and interest rate policy still under review by the Bank of Canada, we’re living in uncertain times. Rates could rise further depending on the direction of inflation and global economic pressures.
Although there’s no official hike at the moment, the risk of rate increases still lingers. For those who are house-hunting or refinancing, the smart move may be to consult a Red Deer mortgage advisor who can monitor the market closely and help you lock in when the time is right.
Fixed vs. Variable Mortgage Rates in Red Deer
Understanding the distinction between fixed and variable rates is imperative when deciding to lock in your mortgage rate.
Fixed Mortgage Rates
Fixed rates remain steady for the length of your mortgage term. You’ll pay the same amount each month, which is great for budgeting and peace of mind.
Choose a fixed rate if:
- You want predictable monthly payments
- You believe rates will rise shortly
- You’re planning to stay in your home long-term
Fixed rates are a popular choice among Red Deer homebuyers, especially those seeking financial stability amid economic fluctuations.
Variable Rate Mortgages for Red Deer
With a variable mortgage, the interest rate can change during your term. If the prime rate goes up or down, so does your rate. These often start lower than fixed rates but come with more risk.
Choose a variable rate if:
- You think interest rates may go down
- You’re financially flexible and can handle rate increases
- You plan to sell or refinance in the short term
Should I Lock in My Rate Now? When Does It Make Sense?
A professional mortgage brokers in Red Deer Alberta can help you understand the pros and cons of both options and choose the one that best fits your situation.
Here are three good reasons to lock in your mortgage rate now:
1. You’re Close to Buying a Home
If you’re about to close on a house, locking in your rate can protect you from sudden rate hikes. Even a small increase can cost you thousands over time.
2. You’re Refinancing
If current mortgage rates are lower than the rate on your existing loan, refinancing with a locked-in rate could save you money—just be sure to calculate any penalties for breaking your current term.
3. You Prefer Payment Stability
If you don’t want to worry about rates rising, a fixed-rate mortgage with a locked-in rate is a safe and secure choice.
How to Get the Lowest Mortgage Rates in Red Deer?
Finding the lowest mortgage rates in Red Deer requires more than just a quick online search. Here’s how to secure the best deal:
1. Use a Mortgage Broker in Red Deer, Alberta: Working with a local broker gives you access to multiple lenders, including ones that don’t deal directly with the public. A broker can shop around on your behalf to find the lowest rates and best terms.
2. Improve Your Credit Score: Higher credit scores mean better rates. Pay off debts, avoid new credit inquiries, and stay current on all bills before applying.
3. Save for a Larger Down Payment: Putting more money down can lower your interest rate and reduce or eliminate mortgage insurance premiums.
4. Get Pre-Approved: Getting pre-approved not only strengthens your position when making an offer, it can also secure your mortgage rate for 90 to 120 days.
Final Thoughts: Should You Lock In Today?
The decision to lock in a mortgage rate is deeply personal and depends on your goals, timeline, and financial comfort zone.
If you prefer stability and are concerned about rates rising, locking in now with a fixed rate is a smart move. If you’re flexible and believe rates could go down, a variable rate or waiting to lock may work in your favour.
No matter where you are in the homebuying process, the key is to work with a knowledgeable mortgage advisor Red Deer who understands both your needs and the market.
