What Is a Mortgage Rate Lock?

A mortgage rate lock may be a smart idea if the current mortgage rates are low but you worry about your rate fluctuating prior to closing. Not all mortgage companies offer the option to lock in your rate, but if yours does, doing so can help you avoid unpleasant surprises at closing.

How a Mortgage Rate Lock Works

When you shop for a loan, your lender quotes you an interest rate for your mortgage. The interest rate the lender quotes is accurate for the day on which its quoted, but by the time your loan reaches closing, interest rates may have increased. This could result in your paying a higher interest rate on your loan than the one you originally anticipated. A mortgage rate lock allows you to keep the original interest rate quoted by the lender from the time of the quote through closing.

Lenders Charge Fees to Lock Rates

Don’t be surprised if your lender charges a fee to lock in your interest rate. This may be an up-front fee or a fee incorporated into the mortgage loan or paid at closing. Mortgage rate lock-in fees are often nonrefundable in the event you change your mind about the mortgage loan or a problem arises with your application.

Rate Locks Expire

Mortgage rate locks are typically good for 30 days, but this time frame varies depending on the lender. Talk to your lender to make sure that your rate lock will last from the date you purchase it until the date you plan to close on the home.

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