Lock It In: A Practical Guide to Mortgage Rate Locks and Securing Your Best Deal

A rate lock is an agreement between you and your lender that secures your interest rate for a specific period, usually 15, 30, 45, or 60 days. When you start your loan process, your rate will float until it is locked. Your loan officer can lock your rate for you, and once your rate has been locked, you will receive updated documents showing your locked rate. When you lock your rate, you are protected if interest rates rise. This ensures that the payment you budgeted and qualified for does not increase. However, it is essential to note that if rates drop after locking, you may not benefit unless you have a float-down option or are willing to pay a fee to re-lock.

Locking your rate at the beginning of the process can provide a favorable rate should rates increase. However, if you think rates may fall, you can wait, but timing the market is tricky, and you should consult with your licensed loan officer. Consider your timeline and the market’s current condition when locking or floating. There are several lock periods, and shorter locks generally offer slightly better pricing, but they also offer less flexibility if the closing and funding of your loan are delayed.

Some lenders offer the option of floating down, so you may still benefit from a lower interest rate if your rate drops after you lock in the rate. Other lenders provide rate lock extensions without charge. When deciding whether to lock or continue floating, it is beneficial to compare different lenders’ policies and consult with an experienced loan officer.

Choosing to lock should be influenced by a combination of factors, including your comfort with risk, your certainty regarding the closing date, and your overall considerations regarding the costs involved. In many cases, you will find that a slightly higher interest rate can be cheaper than paying for multiple lock extensions. Communicating with a licensed loan officer can help determine your most appropriate action.