Definition
The rate hold is a contractual guarantee by which a lender commits to offer a specific mortgage rate for a set period, regardless of future market movements.
**How it works**: - Granted at mortgage pre-authorization - Standard duration: 90-120 days (depending on lender) - If market rates fall during the period: the borrower generally benefits from the lower rate (the hold protects against increases, not decreases) - If rates rise: the borrower is protected at the locked rate
**Conditions**: - The hold is conditional on final approval (property appraisal, final income verification) - A pre-authorization with hold is NOT a final approval - The hold may be cancelled if the borrower's financial situation changes
**Purchase strategy**: - In a rising rate environment: obtain a pre-authorization with hold at the start of the search - If the hold expires: renew the pre-authorization (income assessment redone) - Some lenders allow 'holding' multiple times (with credit check each time)
**Pre-authorization vs. hold distinction**: You can have a pre-authorization without a rate hold. A formal rate hold is a distinct guarantee explicitly mentioned in the pre-authorization letter.