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Mortgage Rate Locks
Mortgage Rate Locks
Lock Your Interest Rate
A rate lock, sometimes called a loan lock, allows you to lock in the interest rate on your loan. With a rate lock, we must give you a mortgage at the agreed-upon rate during the rate-lock period, no matter how interest rates change between when you are approved and when your loan closes. Even if rates go up before closing, you will still get the lower interest rate.
It is always a good idea to lock in an interest rate if you want the best deal on your loan. When you shop around for a mortgage, it can be very tempting to hold off and see where the market is moving. Many buyers do this in hopes that they can hold off for a better rate. What happens if rates go up, not down? If you do not lock in your rate, you will be at the mercy of fluctuations in the market while your loan is processed.
Changing Mortgage Rates?
If rates go up while your rate lock is in effect, you will not be impacted. You will still pay the lower rate you're committed to. If rates go down, however, you will still be obligated to pay the same rate you agreed to, and you will not be able to take advantage of the lower rate. There are some exceptions, however. You may get a "float down" provision, which means you can take advantage of lower rates if they go down during the rate-lock period.
It is also possible to rewrite your rate lock to reflect a new, lower rate, but this can cost you more money.
When to Lock in Your Mortgage Rate
It is usually a good idea to sign a purchase agreement on a specific home before requesting a loan lock. You can then look for the right loan with a good rate and ask us to guarantee the interest rate in writing. Try not to lock in your interest rate too early in the process, as most loan locks will only be in effect for several weeks or up to two months.
It is possible for the rate lock to expire before you close!
Costs of Mortgage Rate Locks
Some lenders charge for a rate lock, while others do not. If there is a fee, it may be a percentage of the loan amount, a flat-rate fee or it can be a slightly higher interest rate. Sometimes, the fee is refundable, but not always.
Most lenders offer free short-term loan locks of less than 60 days, while longer-term locks usually cost something.
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