How Does a Mortgage Rate Lock Work?

When your lender “locks” your mortgage rate, they are promising you will get that interest rate on your mortgage for a specific amount of time, typically 15 or 30 days.  Rate locks can be for longer periods of time, like 45 days, but the longer the amount of time the more it will cost you. It is up to you as the borrower to decide if you want to lock an interest rate for your loan or not. A mortgage rate lock includes the annual interest rate, fees and your monthly payment plan.

Speaking to your lender about locking your rate is especially important if you think interest rates will increase over the near term or if you are on a tight budget and a higher mortgage rate may disqualify you for your loan. 

Since interest rates can fluctuate, rate locks help borrowers feel confident that they have guaranteed themselves a rate for their loan regardless of what the economy is doing.  In other words, if you have a rate locked at 3.0% for 30 days and during that time interest rates go to 4.0%, you will still receive a rate of 3.0%. Likewise, if interest rates drop to 2.5% and your rate is locked at 3.0%, you will still have an interest rate of 3.0%.

A rate lock also puts a deadline in place for getting your loan closed.  This means the lender and the borrower have a limited amount of time to complete documentation requests, provide information and perform any other requirements. If your loan cannot be closed during the lock period then you will have to pay to extend your rate lock or be subject to the market interest rates.

You can back out of an interest rate lock, but it will come with consequences. Backing out generally means switching lenders.  You will need to start your mortgage application all over again, you’ll need to have a new credit report completed and if you paid for an appraisal you will need to pay for another one with the new lender. If you are concerned about your rate lock, it’s best to discuss your options with your current lender instead of backing out.

To learn more about Integrated Lending Group and our team, check out some of our reviews! Google Reviews If you have any home lending needs, please contact us at (714) 696-6773.

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