With mortgage rates constantly fluctuating, many lenders offer the ability to lock in a specific mortgage rate. These provisions keep your interest rate the same for an agreed upon lock in period, regardless of whether national rates fall or rise.
However, while a rate lock period can have its advantages, it's not the right answer for everyone. Here is some more important info about mortgage interest rates and locks for homebuyers to be aware of:
Can you lock in a mortgage rate?
If you lock in interest rates on a mortgage loan, you can secure them from the time of approval until five days before closing. However, the lock only lasts until the end of your current loan, meaning your interest rates will no longer be locked if you refinance.
Therefore, timing your mortgage rate lock is crucial - you might even be able to get a lower rate on your second mortgage as well.
Is a mortgage rate lock worth it?
A rate lock has far fewer disadvantages than risk. An interest rate lock does not help to get the cheapest mortgages, but rather safeguards your buying power. The rate lock prevents a mortgage's interest rate from increasing and potentially pricing you out of your own home due to high monthly mortgage payments.
What is a float-down mortgage rate lock?
Various banks can lock the rates with what are called "float down" provisions. In these cases, the rate is lowered in a specific period after the loan approval. Whenever the price increases, your payment will match what you're quoted for.
While this can benefit many homebuyers, there is a risk that rates will never change in your favor. This would result in paying higher interest rates for the whole term.
Rate lock fees
Having a rate-lock may reduce your mortgage costs, but the process isn't free of charge. Generally, rate locks include a fee starting an initial amount, which increases over time. In some cases, mortgage lenders will charge a fee for extended locks. Make sure to go over the options carefully to avoid any unpleasant surprises down the road.
Should you accept a lock-in rate from your mortgage lender? Keep these factors in mind to make the best decision for your financial future.
About the Author
Jamie Jamieson
Professional Association National Association of Realtors (NAR) New York State Association of Realtors (NYSAR) Hudson Gateway Association of Realtors/ Hudson Gateway Multiple Listing Service Education I hold an A.A in Italian Studies and an A.S in Accounting as well as being one of few students accepted into the Cambridge University International Student Study Program abroad as a returning student in 2011. Community Involvement I am proud to serve on the Home & School Board for St. Augustine School in Ossining and maintain the role of a Girl Scout leader. I am an active member of the community assisting in a variety of fundraising efforts. Personal I am a young and energetic agent who prides myself on providing personalized service with honest representation whether you are buying or selling your home. My expertise of the river towns, attention to detail and excitement for real estate are a few of the many assets I will bring to you. I will utilize my eagerness and market knowledge of the area to build lasting relationships with all of my clients that will extend far beyond the closing table. Be at ease from start to finish with my help. In my spare time, I love exploring the Hudson Valley with my husband, three children and our dog, Pippin. I love scoping out the infinite restaurants, farmers markets and other fabulous activities this exciting county has to offer. Experience Before joining William Raveis Legends Realty Group I started my career with Hudson Homes Sotheby's International Realty team. Prior to real estate, I had a remarkable 15+ year career in Restaurant Management/Hospitality including Ruth's Chris Steakhouse, Rivermarket and several establishments in Newport, Rhode Island. My experience in that field provided me with the foundation of excellence in customer service. Areas Covered All of Westchester County and parts of Putnam County.