A mortgage rate lock freezes your interest rate until loan closing. If you’re comfortable with your rate, and the monthly payment fits your budget, consider locking it in. Getting a mortgage rate lock is a way to keep your home loan’s interest rate from moving higher before closing.
What does locking in an interest rate mean?
A lock-in or rate lock on a mortgage loan means that your interest rate won’t change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application. And, a rate lock may lock you out of a lower interest rate if rates fall after you get your loan offer.
When to lock in a mortgage interest rate?
For most people, it makes sense to first sign a purchase agreement on a specific property before trying to lock in a mortgage rate. Then, find a mortgage loan with a good interest rate (do your homework online to look at available rates) and consider asking your lender to (in writing) lock in the rate.
Why do lenders charge a rate lock fee?
This is because a small change in their cost of funds before the loan is advanced could make the loan completely unprofitable for them, even though they are charging a rate lock fee. Whereas for a 1 year, 2 year, 3 year, 4 year or 5 year fixed rate loan, rate lock is available from almost all lenders. What does a letter of commitment contain?
What happens if rate lock expires before closing?
If the rate lock expires before your loan closes, you may have the option to pay a fee to extend the lock period. Otherwise, you’ll get the interest rate that’s available when you lock before closing. If things change with regard to your application or financial situation, your lender might void your rate lock.
Can a 10 year fixed rate loan be locked?
Each lender has a different policy. Some banks do not allow rate lock for 10 year or 15 year fixed rate loans. This is because a small change in their cost of funds before the loan is advanced could make the loan completely unprofitable for them, even though they are charging a rate lock fee.
