Mortgage Rate Locks

A mortgage rate lock or loan lock is used to lock in your interest rate. When you get a loan lock, your lender agrees to give you the loan at the agreed-upon interest rate during the specified rate lock period, regardless of how interest rates move between approval and closing. Rate locks are important because you can still get a lower rate, even if rates climb before your mortgage closes!

Advantages of Interest Rate Lock

It is always best to ask for a lock on your interest rate to get the best deal. While you may be tempted to hold off to see what happens to rates while you shop for a loan, how will you feel if rates go up instead of down? Considering that rates remain near historic lows, it makes sense to lock in the rate so you will not be at the mercy of rate fluctuations while your mortgage processes.

Changing Interest Rates

If interest rates increase during your rate lock period, it will not affect your loan and you will still pay the lower rate. However, if rates decrease, you will still be stuck with the higher rate you agreed to. There are exceptions such as securing a float down provision with your lender, which allows you to take advantage of lower rates. You may have the option of rewriting your rate lock agreement to reflect the lower rate, but this usually costs money.

When to Get a Rate Lock

It is typically better to sign your purchase agreement on a house before you request a mortgage loan lock. At this point, you can choose the loan option that best fits you and get a good rate, then ask for a rate guarantee in writing. Avoid locking in your rate too early in the underwriting process, because most locks remain good for just weeks to 2 months, and if you do it too early, your lock can expire before your loan closes.

Cost of Rate Lock?

Rate lock costs vary by lender. Some charge a fee, but some do not. If your lender does charge a fee for a mortgage rate lock, it may be a percentage of your loan, a higher rate, or a flat-fee. In some cases, this fee is refundable. If you want a longer rate lock, you can expect to pay more.

Contact Us Today For More Information About Rate Locks!

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