What Is a Mortgage Rate Lock?

What is a mortgage rate lock, and how can it benefit homeowners?

A mortgage rate lock is an agreement between the homeowner and mortgage lender that guarantees a specific interest rate for a predetermined length of time.

Locking in your mortgage rate allows you to secure a favorable interest rate even if the market conditions change before the loan closes. A rate lock can give you peace of mind and offer more stability and predictability in your mortgage payments.

Mortgage rates change frequently, and a rate lock can protect you from fluctuations that could raise rates before your closing. Rate locks often come with a fee, as you’re essentially purchasing this lock as a protective measure to guarantee your mortgage rate.

Because of the benefit of a mortgage rate lock, many homebuyers may consider this option as they’re looking at prospective real estate. However, there are some important considerations you may wish to discuss with a lender before deciding to lock in your rate.

Timing for rate locks: When you lock in your mortgage rate will depend on the lender. Some may offer rate locks when buyers are preapproved, while others wait to extend rate locks until the seller accepts an offer. Generally, closing on a new home takes between 30 and 45 days, so many rate locks are established within this period.

Protection against rising rates: While you can lock in a rate to protect against increases within the set period, if interest rates fall, you won’t be able to adjust your locked mortgage to reflect the new interest rate.

Overall, a mortgage rate lock is a reasonable option for many homebuyers. If you’re looking at locking in the rate on a new home, remember to discuss the benefits and drawbacks with your lender to make the best decision for your financial situation.

Sources: Bankrate.com, CNN.com