First, let’s take a look at what a mortgage rate lock is. A mortgage rate lock is “an agreement between a borrower and a lender that guarantees the borrower a spe cifi c interest rate on a mortgage,” says Smith (Investopedia). Bankrate.com expands on this de fin ition of a rate lock as “an interest rate on a mortgage for a period of time. Th e lender guarantees (with a few exceptions) that the mortgage rate o ff ered to a borrower will remain available to that borrower for a spe cifi c amount of time.” Th is way, the borrower — which is you, as the buyer — won’t have to worry if rates do go up, which is a very real possibility, in between the time you and your agent present an o ff er 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 fin d a lender who will o ff er a rate lock for an agreed-upon length of time for free, but o ft en 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 o ff er free rate locks up to 45 days. Generally, a ft er 45 days, the rate lock will start to cost you in incrementally higher fees, o ft en in 30-day increments. Further, it’s common for each 30-day extension to also cost a quarter-point in additional fees, although spe cifi c fees can vary sign ifi cantly from one lender to the next. KNOWWHEN TO LOCK IN A RATE So how do you know exactly when to lock in a mortgage rate? First, you should know that you can’t lock in a mortgage rate until a ft er you’ve been approved for a loan. Th is is another reason that 101
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