FAQs
A mortgage rate lock, also called a "lock-in" rate, is a lender's promise to hold a particular interest rate, usually for a specified amount of time, say 30, 45, or 60 days.
What is a lock in a mortgage rate? ›
A mortgage rate lock ensures the rate on your mortgage stays the same, from the initial quote to closing. Locking in your rate isn't a binding contract to work with that lender, though. You can still switch lenders if you choose to.
What is the downside of a rate lock to the borrower? ›
Mortgage Rate Lock Cons
You could miss out on a lower interest rate, which could save you thousands of dollars over the life of the loan. If the rate lock expires, you might be charged hundreds of dollars to extend it or miss out on the rate altogether.
Can you walk away from a mortgage rate lock? ›
Answer: You are free to withdraw your application and break your lock at any time.
What happens if rates go down after I lock in? ›
On the other hand, if you lock your rate and interest rates fall, you can't take advantage of the lower rate unless your rate lock includes a float-down option. A float-down option allows you to take advantage of an interest rate decrease during your rate lock period.
Can you change your interest rate after you lock in? ›
When you lock your interest rate, you're protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate. This is called "repricing" your loan.
What does lock in my rate mean? ›
A mortgage rate lock is an agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage for a specified time period at the prevailing market interest rate. A loan lock provides the borrower with protection against a rise in interest rates during the lock period.
Can a lender not honor a rate lock? ›
A lock failure occurs when a lender does not honor a mortgage price that a borrower had believed was guaranteed. Lock failures occur when interest rates are rising and honoring locks is costly to lenders.
Can you negotiate a mortgage rate after locking? ›
Your lender may offer multiple rate lock periods, giving you the flexibility to choose the term you want. However, you may not be able to negotiate the fee, and once you've entered a lock-in period, you typically can't change the terms except to extend it.
Can you cancel a rate lock? ›
You can back out of a mortgage rate lock, but there are consequences. Backing out of a rate lock means giving up the application you've put time and money into. You'll have to start your mortgage application over from the start, and you'll likely have to re-pay fees like the credit check and home appraisal.
The charge for a rate lock could range from 0.25% to 0.5% of the amount of your mortgage. For example, on a mortgage loan of $450,000, a 0.25% rate lock deposit would be $1,125.
Can you float down after rate lock? ›
It's important to know what a lender requires before attempting to float the rate down. The only way to exercise the float-down option is to ask your lender for it. Even if your rate lock agreement has the provision, it doesn't automatically happen. You must activate the offer and get lender approval.
Are rate lock fees refundable? ›
Extended rate locks require you to pay an upfront fee (often . 25% to 1.0% of your loan amount), although that fee may be refunded at closing. Your locked rate is also higher than the market rate and increases the longer the lock.
Is it worth locking in interest rates now? ›
While mortgage rates could fall in 2024, it's not a given. If you're risk-averse and want to avoid any chance of your mortgage rate increasing, locking in your mortgage rate today may be the best option. But if you think rates will drop before you make an offer, choosing not to have a rate lock could make more sense.
What happens if a rate lock expires before closing? ›
Impact of Rate Lock Expirations
If your rate lock expires, it may cost you more money! Most lenders will charge a fee to extend your rate. The amount of that fee is typically calculated based on the interest rate at the time the extension is requested. It may cost you thousands of dollars to extend.
Can you switch lender after rate lock? ›
If you're switching because interest rates have dropped, you don't have to worry about this. But in other scenarios, if you've locked in a rate with your current lender, the new lender isn't bound by that agreement, which could result in a higher interest rate.
Are you committed if you lock in a rate? ›
Typically, once you've locked in your rate, you're committed to it. However, with Direct Mortgage Loans, there's a chance you could take advantage of our float-down policy. This means that if rates drop, you may be able to get the lower rate.
What happens if my rate lock expires? ›
Impact of Rate Lock Expirations
If your rate lock expires, it may cost you more money! Most lenders will charge a fee to extend your rate. The amount of that fee is typically calculated based on the interest rate at the time the extension is requested. It may cost you thousands of dollars to extend.
What is lock in rate? ›
A locked-in rate guarantees the interest rate for a set period of time, which can help buyers finalize their financing without the fear of interest rates going up.
