now when you close on your mortgage,” says Smith.
You don’t want to miss out on a great rate or cost yourself a lot of money down the road, should the market take a turn for the worse and you’re stuck paying a higher interest rate, waiting for the market to settle. If you’re concerned about the market in your area or worried that rates will climb even further before closing, get a “mortgage rate lock.”
WHAT'S A MORTGAGE RATE LOCK?
A mortgage rate lock is “an agreement between a borrower and a lender that guarantees the borrower a specific interest rate on a mortgage,” says Smith (Investopedia). Bankrate.com expands on this definition of a rate lock: “The lender guarantees (with a few exceptions) that the mortgage rate offered to a borrower will remain available to that borrower for a specific amount of time.” This way, the borrower (you, the buyer) won’t have to worry if rates go up between the time you and your agent present an offer and when you close on the home. How long do mortgage rate locks last? Typically, they last anywhere from 30 to 60 days, but they can also last up to 120, and sometimes even longer. Sometimes, you can find a lender who will offer a rate lock for an agreed-upon length of time for free, but often they will charge if you request an extension of the lock. Also, many lenders operate within a tiered system. For example, in general, rate locks of 30 days or less are usually free; some lenders offer free rate locks up to 45 days. Generally, after 45 days, the rate lock will start to cost you in incrementally higher fees, often in 30-day increments. Further, it’s common for each 30-day extension to also cost a quarter-point in additional fees, although specific fees can vary significantly from one lender to the next.
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