Mortgage Rate Lock: When and How to Secure Your Rate
Protect yourself from rate fluctuations and secure your ideal mortgage rate with our guide on when and how to lock your mortgage rate quickly and easily!
What Is Mortgage Rate Lock?
Mortgage rate lock is a mortgage protection option that can help make sure your loan interest rate does not change after you have been approved for a loan and you are ready to close. Rate lock is basically an agreement between borrowers and lenders that freeze an agreed-upon interest rate until one of two things happen: the loan closes or the lock-in period expires.
When Should You Secure Your Rate?
It is important to lock in your rate as soon as possible, since interest rates can fluctuate up until the day of your loan closing. Though there is no one-size-fits-all answer to when to lock your rate, it is generally wise to do it when your rate is at least 0.25 percentage points lower than the current market rate.
Also, if you are expecting a large change in the market rate by the time your loan closes, it might be wise to lock in your rate. Lastly, if you are facing time pressure due to external factors (such as a requirement from the seller or a loss of favorable pricing), it might be necessary to lock in your rate as soon as possible.
How to Secure Your Rate
In order to lock in your rate, you will need to contact your lender and discuss the details and terms. Make sure to ask about any costs associated with the rate lock and understand any fees or restrictions before making your decision.
Once you have discussed the rate lock terms with your lender, you will need to fill out a rate lock agreement form. This form will usually include the amount of the loan, the rate, and the expiration date of the lock-in period.
After you have filled out the form, the lender will review and approve it. Once the rate lock agreement is approved, both you and the lender are bound to it and you won't be subject to any changes in the market rate of interest.
Conclusion
Mortgage rate lock is a great tool to have when securing a loan. It ensures that the interest rate you get is the one you need. Make sure to lock in a rate when your desired rate is 0.25 points lower than the current market rate and when you are facing time pressure due to external factors. Also, always ask the lender about the cost and restrictions associated with a rate lock before signing the agreement.