Mortgages 101: Understanding Mortgage Rate Lock

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Mortgage interest rates fluctuate at the determination of the real estate market in your area. Because it is challenging for the average person to estimate whether interest rates will increase or decrease, it is to their benefit to have their mortgage rate locked in whenever possible. This practice is referred to as a “rate lock” or “mortgage rate lock” and essentially promises the borrower a certain interest rate on their mortgage while they wait to close on their loan.

Getting your rate locked in is a very sound practice, as it protects consumers from suddenly sky-rocketing interest rates. These rates can change on a daily basis, so when you find yourself an interest rate that is ideal for your budget, lock that down if the opportunity presents itself!

What is a Mortgage Rate Lock?

A mortgage rate lock is something of a promise that lenders make to prospective borrowers. They lock in a certain interest rate for a set period of time while the borrower waits to close on their loan. This protects the borrower from fluctuations in the market that could cause interest rates to increase.

How Long Does a Rate Lock Last?

This is up to the specific lender, but the average rate lock can be held for anywhere between 30 and 60 days.

When Can a Rate Be Locked In?

The answer to this question depends on your lender. Some will allow you to lock in a rate for a period of time if you’ve passed the pre-approval step and have a prospective address in mind. Others will only allow you to lock in a rate once the seller of the home has accepted your offer. Make sure to discuss the terms that your chosen lender has laid out on this matter before moving forward.

Does it Cost Anything to Lock in a Rate?

Typically, you will not be paying a single line-item cost for your mortgage rate lock. Instead, the cost of the rate lock will be fused into the overall cost of your mortgage. Rate locks are rarely, if ever, free. Potential borrowers may also be asked to pay an additional fee outright if they wish to extend their mortgage lock past the 30 to 60-day period allotted.

What Will Happen if the Lock Expires Before Closing?

One of two things will happen:

  1. The lender will extend the mortgage rate lock, for a fee.
  2. You will be subjected to the prevailing terms now that the rate lock is no longer active.

A mortgage rate lock is a great opportunity for ambitious home buyers to save money on their interest rates. However, you should be ready to move toward closing in a rapid fashion before requesting a mortgage rate lock from your chosen lender. If you are unable to pay a fee to extend the lock, or if the lender simply doesn’t allow for lock extensions, you may find yourself stuck with unexpectedly high interest rates to pay.


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