What Does it Mean When Your Rate is "Locked" For A Mortgage Rate?

What Does it Mean When Your Rate is “Locked” When Searching For A Mortgage Rate?

 In Blog, Real Estate Questions

Shopping for a mortgage can take some time. Between comparing rates to find the best terms and trying to get approved, it can be difficult to get exactly what you’re looking for.

This is why mortgage locks are important. Once you find a lender willing to lend you the amount you need at reasonable rates, you want to make sure that offer is still on the table when you need it.


So, what is a “locked” mortgage rate, how can you lock in a rate, and how long does it last?

These are important questions and you should know the answers before you start shopping for a mortgage.



What is a Mortgage Rate Lock?

A mortgage rate lock is simply a guarantee from a lender that they will offer you a set interest rate and loan amount for a certain period of time. This helps borrowers protect themselves against growing interest rates.


For example, say you are comparing rates between lenders and the average tends to be around 5%. However, you find a lender offering a 4% interest rate, so you agree to a rate lock at 4% for 30 days. That means that even if that lender’s interest rates increase in that 30-day period, you would still be able to get your mortgage with a 4% interest rate.



How Much Does it Cost?

How much a locked rate costs entirely depends on your lender. In some cases, it might be free. In other cases, lenders may charge a fee. Lenders may charge flat fees or fees dependent on the total amount of the mortgage. They also may or may not be refundable.


Often, mortgage rate locks don’t cost too much money. Typically, only a few hundred dollars at most, which can be well worth it if it saves you from a higher interest rate.



How Long does a Locked Rate Last?

Again, this depends on your lender. However, rate locks generally last between 30 to 60 days.


While longer rate locks are preferable if all other factors are the same, many lenders will charge fees or increase the interest rate for rate locks that last longer than 60 days.


For this reason, it is often best for buyers not to lock in a rate until they have made an offer on a home. Since you may be charged a fee if you surpass the agreed-upon period, locking in a rate too early isn’t always the best choice.


The housing market can be volatile. As such, mortgage interest rates are constantly changing. Depending on the state of the market when you are attempting to buy a home, you may find it difficult to find a lender offering reasonable interest rates.


Mortgage rate locks help make sure that you receive the low interest rate you were offered when it’s time to buy a house. It’s important to understand exactly what a rate lock is, why it benefits you, and what it might cost you so that you can find the best mortgage terms available.

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