How Interest Rates are Like Gas Prices
Trish Pritchard • July 16, 2020
Have you ever noticed that just like gas prices, interest rates seem to go up and down for no reason at all?
How come it feels like right before you are ready to buy a property, rumours of interest rate changes will start to flood the media? Or why do gas prices always seem to go up right before the long weekend (when you are heading out of town)? You could spend a lifetime trying to figure these things out. However, knowing why these things happen isn't as important as knowing what to do when they happen!
How to Protect Yourself from Rising Interest Rates!
Allow me to share a few things you can do to protect yourself from rising interest rates if you are looking to purchase a property in the near future.
Be Prepared. Know Your Mortgage Options
Unlike most gas stations where gas is gas regardless of where you fill up, not all mortgage products are created equal. Just because a mortgage product has a lower sticker price attached, doesn't mean it's necessarily a better deal. You really have to understand the fine print in order to make the best choice for you.
As your unbiased mortgage professional, I can help you understand all the products available to you and how the fine print will impact the overall cost of the mortgage. I can help you understand the difference between fixed and variable rates, the impact of shorter vs longer terms and amortizations, pre-payment privileges, and potential mortgage penalties.
By understanding your options, you can make a decision that is based on your financial situation and goals rather than based on fluctuating interest rates. Protect yourself emotionally by not placing such a high value on an arbitrary "sticker price" (rate) instead focus on finding the best mortgage product available for you at the time you are purchasing.
Be Prepared. Get a Pre-approval With a Rate Hold
If you are shopping for a property, not only should you be pre-approved for the mortgage, but you should have a rate hold in place as well.
A pre-approval is a lender's written commitment to offer you a mortgage assuming the details in the application are proven accurate. A pre-approval is not a guarantee that you will get the mortgage, just that they have looked at the initial application and believe you are a enough of a qualified applicant to proceed once you have found a property to purchase.
The pre-approval process consists of the following:
- A mortgage application - to assess your financial situation (employment, credit and downpayment).
- Collection of documents - to support the application.
- Submission of the application - for lender review.
- A response from the lender - indicating they will consider lending to you based on a set purchase price limit, specific product, and acceptable property.
- A rate hold - the time you have to close the mortgage while they will guarantee it at a certain rate.
So as part of the pre-approval, it's really the rate hold that protects you against rising interest rates. A rate hold is a lender's commitment to hold a certain rate on a certain product for a certain time frame. For example, if you like the 5 year fixed term (product), and a lender is offering 2.64% (rate) a rate hold can be secured that will guarantee the rate anywhere from 30-120 days (time frame), this is the time you have to take possession of the property.
Some lenders offer more aggressive rates (lower rates) but limit the hold to a shorter time period, usually 30-60 days. This is why some banks, lenders, or brokers advertise "Rate Specials". However it should be noted that not all rate specials come with a rate hold. Some rates are only available for applications where an offer to purchase has been accepted on a property.
If your rate hold expires, it is easy enough to get another one in place with an updated application. Also, if rates drop while you have a hold in place, and you find a property to purchase, typically we are able to drop the rate for you at closing. It's as easy as that!
Now... if you made it this far and you're looking for advice on how to get the best price at the pump, unfortunately I can't help you out there, that is a mystery to everyone! But if you want to know more about securing a pre-approval and a rate hold, please contact me anytime.
Why the Source of Your Down Payment Matters More Than You Think When buying a home, most people focus on how much they need for a down payment. What often gets overlooked is that where the down payment comes from matters just as much to the lender . The source of your down payment affects approval, risk assessment, and how your mortgage is structured. Here’s why lenders care—and what you need to know. 1. Anti–Money Laundering Requirements Lenders aren’t just being cautious—they’re legally required to verify the source of your down payment. To comply with anti–money laundering regulations, lenders must document where every dollar of the down payment came from on every purchase. Acceptable Down Payment Sources Down payments can come from: Your own savings or investments Borrowed funds through an insured program (such as FlexDown) A gift from an immediate family member How You Prove the Source Personal savings: You’ll need bank statements showing the funds have been in your account for at least 90 days , or proof they were accumulated through payroll deposits or other acceptable sources. Borrowed funds: Any borrowed portion must be included in your debt service ratios , since you’re responsible for repayment. Gifted funds: A signed gift letter is required confirming the money is a true gift with no repayment obligation , along with proof the funds were deposited into your account. 2. Financial Suitability and Risk The source of your down payment also tells the lender a lot about your financial habits. Down payments coming from your own savings demonstrate: Positive cash flow The ability to save consistently Strong financial management This reassures lenders that you’re more likely to keep up with mortgage payments. If the down payment is borrowed or gifted, lenders may look more closely at the rest of your application to ensure the mortgage remains affordable. Why a Larger Down Payment Helps From a lender’s perspective, more equity equals lower risk. The more money you have invested in the property, the less likely you are to walk away from the mortgage. This reduces the lender’s exposure and can sometimes result in better terms. 3. Down Payment and Loan-to-Value (LTV) Your down payment directly establishes your loan-to-value ratio (LTV)—the percentage of the property’s value being financed. In Canada: Lenders can finance up to 95% of a property’s value The buyer must contribute at least 5% as a down payment Example: On a $400,000 purchase: Maximum mortgage = $380,000 Minimum down payment = $20,000 How the Source Affects LTV Property value must be genuine and independently supported. Lenders rely on appraisals and comparable sales—not artificial price inflation. If: The seller provides money back The buyer doesn’t bring the full down payment independently Funds move “behind the scenes” …the lender considers this a change to the LTV and may decline the mortgage. All financial details of the purchase must be fully disclosed. Non-disclosure is mortgage fraud , and lenders will not proceed if the numbers don’t align. Final Thoughts Lenders ask for detailed documentation about your down payment source for good reason—it affects legality, risk, and the structure of your mortgage. Understanding these rules upfront helps avoid delays, declined applications, and last-minute surprises. If you’d like to review your down payment options or talk through mortgage financing, feel free to connect anytime. I’d be happy to walk you through the process and help you plan with confidence.
Mortgage Options During Divorce or Separation: What You Should Know If you’re going through—or considering—a divorce or separation, you may not realize that there are mortgage solutions specifically designed to help one party keep the home . For many people, the family home is their largest asset and where most of their equity is tied up. In situations like this, a spousal buyout program can allow one person to refinance the property and buy out the other party’s share—often up to 95% of the home’s value . This option can work whether you want to keep the home or your former partner does. What Is the Spousal Buyout Program? The spousal buyout program is a refinancing option that allows one owner to purchase the other owner’s share of the property as part of a separation or divorce settlement. In some cases, it can also be used to pay off jointly held debts, as outlined in a legal agreement. Below are some of the most common questions about how the program works. Is a finalized separation agreement required? Yes. Lenders require a signed and finalized separation agreement that clearly outlines how assets and debts are to be divided. This document is essential for approval. Can the funds be used for renovations or personal debts? No. Funds from a spousal buyout can only be used to: Buy out the other owner’s share of equity Pay off joint debts specifically listed in the separation agreement They cannot be used for renovations, personal loans, or unrelated expenses. How much equity can be accessed? The maximum amount available is the amount required to: Buy out the other party’s agreed-upon share of equity Pay off any joint debts listed in the agreement This amount cannot exceed 95% loan-to-value . What is the maximum loan-to-value allowed? The maximum loan-to-value is the lesser of : 95%, or The remaining mortgage balance plus the required buyout and joint debt payout The property must be the primary owner-occupied residence . Do all parties need to be on title? Yes. All individuals involved in the buyout must currently be registered on title. Your solicitor will confirm this through a title search. Does this only apply to married or common-law couples? No. While commonly used for married or common-law couples, the program may also apply to siblings or friends who jointly own a property and need one party to exit the mortgage. These cases are typically reviewed on an exception basis and require insurer approval. If no separation agreement exists, the purchase contract must clearly outline the buyout terms. Is a full appraisal required? Yes. A physical, on-site appraisal is required to confirm the property’s value before the mortgage can be finalized. Final Thoughts This overview covers some of the most common questions about mortgage options during separation or divorce, but every situation is different. Working with an independent mortgage professional gives you access to multiple lenders, specialized programs, and unbiased advice—so you can clearly understand your options and choose what’s best for your future. If you’re navigating a separation and need guidance around keeping or selling the home, feel free to connect anytime. All conversations are handled with discretion and confidentiality, and I’d be happy to walk you through your options.
Why More Mortgage Options Matter—Especially for Assignment Purchases One of the biggest advantages of working with an independent mortgage professional is access to choice. Instead of being limited to one lender and one set of products, mortgage brokers work with multiple lenders—each with different guidelines, risk tolerances, and mortgage solutions. That flexibility becomes especially valuable when your situation doesn’t fit neatly into a “standard” box. A great example of this is purchasing new construction through an assignment contract . Why Assignment Purchases Can Be Challenging Assignment purchases are often viewed as higher risk by traditional lenders. Rather than declining these deals outright, many lenders quietly make them difficult by adding layers of conditions, restrictions, or uncertainty. This can lead to delays, frustration, or financing falling apart late in the process. The Good News There are lenders—available exclusively through the broker channel —that have clear, favourable policies for assignment purchases. With the right lender and proper planning, these transactions are absolutely doable. Typical Financing Requirements for Assignment Purchases While every situation is unique, many lenders that allow assignment financing look for the following: Standard purchase qualification, including income verification, credit, and down payment Assignments accepted at either the original purchase price or current market value Minimum 620 credit score , with no prior bankruptcies or consumer proposals The full down payment must come from the purchaser —seller incentives cannot be used Required Documentation To secure financing, lenders typically require: The original purchase agreement signed by all parties The MLS listing (if applicable) The assignment agreement signed by the builder, original purchaser, and new buyer Any side agreements outlining changes to the purchase price A full appraisal to confirm value This list isn’t exhaustive, but it highlights that while assignment purchases require more coordination, they are very achievable with the right lender and guidance. Final Thoughts Assignment contracts can open doors to great opportunities—but only if your financing supports the transaction. This is where access to multiple lenders and specialized policies makes a real difference. If you’re considering purchasing new construction through an assignment, or if you’d like to explore more traditional purchase options, feel free to connect anytime. I’d be happy to walk you through the mortgage products available and help you choose an option that doesn’t limit your financing possibilities.
