The interest rate you discover at the beginning of your search might no longer be the lowest when it comes to finalizing the deal at closing. Mortgage rates are changing frequently as of recent.
What is the formula, then, that will enable you to obtain the overall lowest mortgage rate?
After Your Mortgage Is Approved, What Happens If Rates Drop?
Consider the following case: You’ve managed to lock in what seems to be the lowest mortgage rate. However, just because you signed the contract doesn’t mean that pricing is fixed. You still have time to benefit from the reduced rate if mortgage rates decide to decline. A ‘float down’ is a service provided by most mortgage companies. In plain English, if rates fall, your rate may too.
Keep a careful check on the interest rates and request that the lender proceed with the reduction from your trusted mortgage professional.
We don't want to commit to the reduced rate too quickly. Why?
Switching Lenders to Get a Better Rate
You are not required by law to use the lender who has given you a mortgage commitment if you have already agreed to work with them and signed on the dotted line. Should a better offer surface, you are still free to switch to a different lender. However, this does not imply that you should abandon ship and seize the new, lower rate the moment you learn about it.
Why?
On occasion, lenders will outbid one another by offering cheaper rates. You might see a lender today providing a cheaper rate, only for the lender with whom you already have approval to swoop in days later with the same or an even lower rate.
Mortgage Rate Snare
The cheapest rate is not necessarily the best option because not all mortgages are created equal. In fact, picking a mortgage solely based on rate might be an expensive error because certain lenders may have stricter terms and conditions that could cost you in the long run. In my blog post The Best Rate vs. The Best Mortgage, I go into detail about this.
Conclusion
Our goal is to help you save as much money as we can. When you initially apply for a mortgage, keep in mind that it’s not just about getting the lowest rate.
As your mortgage broker we we always read the mortgage approval letter provided to you by the lender in full. We will always find a lender who that best suits your financial goals. If you have any questions regarding the conditions in your mortgage approval letter please contact us and we will review it for you. Feel free to call us at 416-830-1510.
