Why You Should Consider a Rate Lock-In

As you move through the mortgage process, your interest rate isn’t guaranteed until it’s locked in. A rate lock-in can help you stay on budget and protect you from rising rates before closing.

What Is a Rate Lock-In?

A rate lock-in is an agreement between you and your lender. It guarantees that the interest rate you’re offered won’t change for a set amount of time — even if rates go up before you close on your home.

Why Are Rate Lock-Ins Important?

A rate lock-in provides you peace of mind; you don’t have to worry about the ups and downs of the market while you wait for your loan to close. Knowing your interest rate ahead of time can also help you plan monthly mortgage payments, making it easier to set a monthly budget. Without a lock-in, rising rates could push your payment higher —sometimes enough to make your new home harder to afford.

When Should You Consider Locking Your Rate?

The right time to lock in your rate depends on a few things:

• The current market.
• How close you are to closing.
• How comfortable you are with risk.

If rates are lower and you’re happy with your type of loan and monthly payment, it may be smart to lock it in.

Your lender is your best guide and can help you decide when to lock your rate and for how long to keep it locked.

Key Things to Know About Rate Lock-Ins

• Rate locks are only good for a set period. Standard locks are offered 30, 45, 60 or 90 days, with 30 or 45 days being the most common. You’ll need to close your loan before the lock expires or you might lose the rate.
• Some lenders may charge a small fee for rate locks, while others may include it under covered costs. Usually, a longer lock period will have a higher fee. Ask your lender if there’s a cost and whether it’s refundable.
• If interest rates drop after you’ve locked, you usually stay locked in at the higher rate. Some lenders may offer a “float-down” option, which lets you take advantage of a lower rate if one becomes available during your lock period. Terms and availability of float-down options will vary, make sure to ask your lender what they offer.  
• You can still shop for lower rates after a lock-in. If you find a more attractive rate from a different lender, you are not obligated to keep your lock-in. If you choose to work with a different lender, any lock-in fees paid should be reimbursed.
• Always get your lock-in agreement in writing. It should clearly state the interest rate, the type of loan, the length of the lock and any fees.

A rate lock-in can be a smart move for any homebuyer,  giving you more control, stability and peace of mind during what can be a stressful time. You’ll know exactly what your rate will be and can plan your finances without worrying about changing interest rates.

Talk to your lender early in the homebuying process to learn your options. A little preparation can go a long way toward making your homeownership journey smoother.