money, can often come with a cost. For example, some lenders will charge a mortgage rate lock deposit upfront, and others will offer a rate lock in exchange for a slightly higher interest rate than the current prevailing rate or require the borrower to pay a certain number of points, which could be fixed or floating. “Fixed points refer to a set number of points; with floating points, the interest rate is locked in, but the number of points that must be paid to guarantee the rate can change over time,” explains Smith. This is why it’s important to understand your lender’s rules regarding mortgage rate locks. Be absolutely sure that your mortgage rate lock will last long enough to cover the home- buying process from start to finish (closing). Some closing processes can last a month or longer. If you suspect that this will be the case for you, chat with your lender about locking down a rate for the full length of that process without paying penalty fees. Often, if you talk to the lender ahead of time, you can avoid paying for mortgage rate lock extensions later on. If the home doesn’t close before the end of the agreed-upon mortgage rate lock period, then the guaranteed rate that you “locked in” will expire, and any deposit that you paid could be forfeited to the lender. If the expiration date passes because of something you failed to do, or something you did that you shouldn’t have, then most likely you’ll be out of luck for that rate you tried to lock in. However, if the date passes because of the lender’s action or inaction, then the original rate you agreed on could still be available. Don’t make the mistake of assuming that a mortgage rate lock will provide unlimited protection. Yes, a lock will certainly protect you against rising interest rates when the market shifts, but a lock will also prevent you from taking advantage of an even lower interest rate if rates fall when the market shifts in the other direction. Before you enter into a rate lock agreement, ask your lender if they will offer you a “one-time election,” or a mortgage
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