Refinancing? Get on Top of the Lock

Canada’s first native-born Prime Minister, Sir John Abbott, was known for telling the following story: “How do you know so much about everything?' was asked of a very wise and intelligent man; and the answer was 'By never being afraid or ashamed to ask questions as to anything of which I was ignorant.’”
   
With mortgage rates at 50-year lows, it’s likely that you’ve been considering a mortgage refinance. If so, you’ll want to get the best rate lock-in to protect yourself if mortgage rates begin to rise. To do that, here are the most important questions to wisely ask your lender to ensure that you can lock in and keep the lowest rate possible.

Basic questions

Your first question is to determine whether the lender will allow you to lock in your interest rate and any potential points. Once you find out that they do, make the following inquiries:

1. Can I lock in the rate when I apply, or will I need to wait until my loan is approved?
2. Can you give me the lock in writing? (A lender can say anything to you over the phone, but unless you get it in writing, it’s not worth much.)
3. What is the length of time that I can lock in a rate for?
4. What are the fees for this privilege?
5. If your interest rates drop and I’m already locked, will I get the lower rate automatically, or will I have to pay a fee?
6. Can I float the interest rate now, and lock in the rate at a later time?

Questions about lock-in expiration

Unfortunately, if your loan doesn’t close within the lock-in period, you might lose the rate. Delays can come from any direction. You may not get all your documents in on time, or inspection reports may be completed later than you anticipated. Considering that refinancings account for more than 75 percent of the current mortgage application market, your bank may be experiencing a backlog. In order to know what you’re getting into, ask the following questions about loan processing and expiration:

1. How long do you think it will take for my loan to close?
2. Have there been any delays in processing time because of recent heavy volume?
3. What has been your average processing time for mortgage refinancing over the past few months?
4. What happens to my rate if the lock-in expires before the loan is closed?
5. If the loan doesn’t close during my lock-in period and I lose the rate I desire, will you refund any fees that I’ve paid if I decide to cancel the loan application?
6. If I decide to lock in a new rate once my current lock-in expires, will you charge me an additional fee?

Don’t be afraid to ask these questions—you may think you sound ignorant, but you’ll ultimately be the smart one, especially when you get that coveted low rate. Getting answers is how you become educated and successful. Canada’s former Prime Minister should know.