Rate Hold vs Pre-Approval - A Common Misconception
Michael Hallett • May 29, 2015
mis-con-cep-tion (noun)
- a view or opinion that is incorrect because it is based on faulty thinking or understanding; mistaken notion; an erroneous conception.
With not knowing how to start this particular blog post, I decided to look for some images that might summarize the topic best - What is the difference between a RATE HOLD and a PRE-APPROVAL?
I thought this picture 100% represented how these terms are perceived, you say one thing but you mean the opposite. For most people the term PRE-APPROVAL is more commonly used than the latter. The term RATE HOLD is generally only used in the broker/lender sphere.
Many years ago (seems like the ice age ago) one could place a phone call to their personal banker and lock in a mortgage, then it switched to only requiring a paystub maybe a bank stmt and T4s. Whereas now one requires their entire biography and proof of net worth followed by a blood sample... somewhat facetious, but there is more involved as lenders need to make an accurate risk assessment.
Times have changed and so should our line of thinking. Underwriting mortgages is not cheap and lenders have upfront costs that take years to recoup.
Rate Hold
These are generally automated where nobody even looks at the application. The system only analyzes basic criteria; beacon score, loan-to-value, name and birthdate. No documents are even reviewed. A rate hold is simply just that, a rate hold. It's just a certificate guaranteeing the stated rate for a stated period of time, usually to a maximum of 120 days. Rate holds are mostly utilized for borrowers who are going to purchase or refinance in the near future.
Pre-Approval
The pre-approval approach is generally a more detailed process, with all documents being reviewed, except for the subject property. The lender will have to approve the covenant based on the information provided such as employment, source of the down payment and credit history criteria. Approval of these three pillars is NOT a guarantee that the mortgage application will be approved. The lender still has to do it's due diligence on the fourth pillar (subject property) as it must still meet all the lenders guidelines and insurer if there is less than a 20% down payment.
The most common question you will hear during the purchase process is, ARE YOU PRE-APPROVED?
In my short 6 year tenure I have to worked with numerous clients that thought they were PRE-APPROVED by their 'bank.' But during the subject removal timeline found out that they were NOT pre-approved, all for various reasons. Instead there should be a series of questions asked:
- Have you consulted with your Mortgage Expert?
- If so, when was the last time you had a conversation with her/him?
- Is there a rate hold or pre-approval in place? Do you understand the difference(s)?
- Have you sent her/him your complete package of documents that was requested?
- Are there any changes to employment, credit, the down payment or the purchase price?
- Have you discussed the 'plan' for this property? This will determine the term and mortgage product chosen.
- ...and much more...
As you can see there is much more to consider than just, ARE YOU PRE-APPROVED?
No one mortgage is exactly the same as someone else's. The mortgage process is a complex labyrinth of puzzles pieces that have to fit together perfectly. Note that the puzzle pieces are constantly changing in this industry.
Due to the steep underwriting costs of each mortgage application most lenders are electing to follow the RATE HOLD process. By analyzing a complete 4 Pillar mortgage application package (credit, employment, down payment and subject property) the lender is able to maximize dollars spent to acquire a new client. Navigating the RATE HOLD/PRE-APPROVAL process should be left up to your trusted Mortgage Expert.
The best PRE-APPROVAL is the one that comes from your Mortgage Expert because they can analyze and do a pre-underwrite even before doing a RATE HOLD. With their expert advice you can construct a strategy that is tailored to your specifically to your mortgage financing scenario.
If you have any questions, please don't hesitate to contact me anytime!
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One of the most common questions, “how long does it take to get pre-qualified?” My response, “how fast can you provide the information I need.”
Playing in the forest today. Always fun exploring. #mountainbikingmortgagebroker
Mortgage Brokering meets mountain biking and craft beer. A couple months ago I set for a bike ride with the intention of answering few mortgage related questions, mission accomplished. Any good bike ride pairs nicely with a tasty beer which we enjoyed @parksidebrewery. Hope you see the passion I have for brokering, biking and beer. @torcabikes #mountainbikingmortgagebroker
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Spotted a ski-bunny today @kirstinjhallett so I trapped ‘er. 📸 credit @troy.hartley
Aidan leading the pack up the Lemming Line in seek of fine fresh powder.
Beautiful British Columbia! A cold winter day at its finest.
Aidan and I braved the -19C temperature and windy conditions for the boot to knee deep turns...it was a no-brainer.
Happy Holidays. Seasons Greetings. Merry Christmas. All the best from Kirstin, Aidan and Michael. Enjoy your family time.
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Extreme tubing, watch until the end. Aidan manages to hold on.
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My sons intro to operating a side-by-side on his own. Watch to the end.
The Lookout over looking Tulameen BC. Took some 4x4ing to get there, but we did it.
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Impromptu ride on Burke. I dreamed of the day Aidan would ask to go for a ride...today was the day, “Dad do you want to go for a ride?” Heck ya, let’s go! This was a fun feature at the end.
An afternoon of exploring the Stave Lake zone. Planning to return soon once the snow melts to get some vertical.
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This would have been a fun stunt once upon a time!
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This is a great start to the day!
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Saratoga Beach fire.
Canadian tuxedo.
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Your Guide to Real Estate Investment in Canada Real estate has long been one of the most popular ways Canadians build wealth. Whether you’re purchasing your first rental property or expanding an existing portfolio, understanding how real estate investment works in Canada—and how it’s financed—is key to making smart decisions. This guide walks through the fundamentals you need to know before getting started. Why Canadians Invest in Real Estate Real estate offers several potential benefits as an investment: Long-term appreciation of property value Rental income that can support cash flow Leverage , allowing you to invest using borrowed funds Tangible asset with intrinsic value Portfolio diversification beyond stocks and bonds When structured properly, real estate can support both income and long-term net worth growth. Types of Real Estate Investments Investors typically focus on one or more of the following: Long-term residential rentals Short-term or vacation rentals (subject to local regulations) Multi-unit residential properties Pre-construction or assignment purchases Value-add properties that require renovations Each type comes with different financing rules, risks, and return profiles. Down Payment Requirements for Investment Properties In Canada, investment properties generally require higher down payments than owner-occupied homes. Typical minimums include: 20% down payment for most rental properties Higher down payments may be required depending on: Number of units Property type Borrower profile Lender guidelines Down payment source, income stability, and credit history all play a role in approval. How Rental Income Is Used to Qualify Lenders don’t always count 100% of rental income. Depending on the lender and mortgage product, they may: Use a rental income offset , or Include a percentage of rental income toward qualification Understanding how income is treated can significantly impact borrowing power. Financing Options for Investors Investment financing can include: Conventional mortgages Insured or insurable options (in limited scenarios) Alternative or broker-only lenders Refinancing equity from existing properties Purchase plus improvements for value-add projects Access to multiple lenders is often crucial for investors as portfolios grow. Key Costs Investors Should Plan For Beyond the purchase price, investors should budget for: Property taxes Insurance Maintenance and repairs Vacancy periods Property management fees (if applicable) Legal and closing costs A realistic cash-flow analysis is essential before buying. Risk Considerations Like any investment, real estate carries risk. Key factors to consider include: Interest rate changes Market fluctuations Tenant turnover Regulatory changes Liquidity (real estate is not easily sold quickly) A strong financing structure can help manage many of these risks. The Role of a Mortgage Professional Investment mortgages are rarely “one-size-fits-all.” Lender policies vary widely, especially as you acquire more properties. Working with an independent mortgage professional allows you to: Compare multiple lender strategies Structure financing for long-term growth Preserve flexibility as your portfolio evolves Avoid costly mistakes early on Final Thoughts Real estate investment in Canada can be a powerful wealth-building tool when approached with a clear strategy and proper financing. Whether you’re exploring your first rental property or planning your next acquisition, understanding the numbers—and the lending landscape—matters. If you’d like to discuss investment property financing, run the numbers, or explore your options, feel free to connect. A well-planned mortgage strategy can make all the difference in long-term success.
The Bank of Canada announced today that it is holding its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. For anyone watching the mortgage market — whether you're renewing, purchasing, or simply keeping an eye on borrowing costs — here's a breakdown of what was announced and what it may mean for you.
