Interest rates for mortgages can fluctuate daily. Locking your mortgage rate can guarantee the interest rate you are offered for a period of time when you apply for a mortgage.
What is a mortgage rate lock?
A mortgage rate lock can keep your interest rate the same from the beginning to the end of your loan approval process. If you receive a mortgage rate offer you like, locking the rate can guarantee you will get that rate on your final mortgage.
If you decide against locking your interest rate, you might get a different rate on your final approved mortgage. This is because your interest rate may fluctuate with market trends. There are requirements for mortgage rate locks that include closing within a predetermined time frame. The lock may be nullified if your application status changes too.
When can you lock in a mortgage rate? Is there a best time to lock in a mortgage rate?
Many borrowers lock in their mortgage rate when they first accept a loan offer from a lender. Locking in your loan rate typically contains a certain level of risk. Since mortgage rates can change daily, there is a chance rates will rise or drop after you lock in your rate. There is no way to predict which way the market will trend. It is a good idea to ask your lender how long you are able to wait to lock in your rate.
What do I do if my mortgage rate lock expires before closing?
Some lenders allow you to extend your rate lock, but this can come with an additional fee. When you initially lock your rate, don’t be afraid to ask questions about what the lender’s rate lock period is, their policy, and your available options. It’s a good idea to confirm that the length of your rate lock could last through closing. You can help your lender speed up this process by responding quickly to requests for information and documentation.
Is there a mortgage rate lock fee?
Mortgage rate locks are typically free, but some lenders charge a fee or a percentage of the loan amount. If you lock in a lower rate, you may be able to recoup the cost of the mortgage rate lock over the life of the loan. Mortgage rate lock extensions may also come with a fee if your loan needs more time to process.