If you’re in the process of buying a home you’ve probably heard the term “rate lock” thrown around. But what does it mean and how does it affect you? Here’s everything you need to know about rate locks so you can make the best decision for your situation.
A rate lock is an agreement between a borrower and a lender that protects the borrower from rising interest rates. It gives the borrower the peace of mind of knowing that their interest rate will not go up during the loan process no matter how long it takes.
The lender agrees to lock in the interest rate for a certain period of time usually 30 45 or 60 days. This means that even if rates go up during that time the borrower will still get the locked-in rate.
However if rates go down the borrower will not get the lower rate. This is why it’s important to lock in a rate as soon as possible so you don’t miss out on potential savings.
There are two types of rate locks: floating and fixed.
A floating rate lock means that the interest rate will fluctuate along with market rates. This is a good option if you think rates will go down before your loan closes.
A fixed rate lock means that the interest rate will stay the same for the entire loan process. This is a good option if you think rates will go up before your loan closes.
Most lenders will charge a fee for a rate lock so it’s important to factor that into your decision.
If you’re not sure whether to lock in a rate talk to your lender about the current market conditions and what they expect rates to do in the future. They can help you decide if a rate lock is right for you.
Can I walk away from a rate lock if I’m not happy with the terms?
No once you’ve locked in a rate you’re committed to that rate for the specified time period.
What happens if rates drop after I lock in?
You’ll still be committed to the rate you locked in at even if rates drop afterwards.
Can I lock in more than once?
Yes you can lock in multiple times.
What’s the benefit of locking in?
Locking in protects you from rising rates and gives you the peace of mind of knowing what your rate will be.
Are there any fees associated with locking in?
No there are no fees associated with locking in.
How long does a rate lock last?
A rate lock typically lasts 30 60 or 90 days.
What if I need more time to close on my loan?
You can usually extend your rate lock if you need more time but you may have to pay a fee to do so.
Do I have to lock in my rate?
No you don’t have to lock in your rate but it’s generally a good idea to do so.
When does my rate lock expire?
Your rate lock expires on the date specified in your rate lock agreement.
Can I lock in a rate before I find a home?
Yes you can lock in a rate before you find a home.
How do I lock in a rate?
You lock in a rate by signing a rate lock agreement with your lender.
What is a rate lock?
A rate lock is an agreement between you and your lender that allows you to lock in ainterest rate for a specified period of time.
Why would I want to lock in my rate?
Locking in your rate protects you from rising interest rates and gives you the peace of mind of knowing what your rate will be.
What are the disadvantages of locking in my rate?
If rates drop after you lock in you’ll be stuck with the higher rate.
When should I lock in my rate?
You should lock in your rate when you’re ready to commit to a loan and you’re comfortable with the interest rate.