4 Steps to Lock in a Mortgage Rate

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  • A mortgage rate lock guarantees that your interest rate will not change for a set period of time.
  • This protects you from rising interest rates and sudden market changes.
  • Once you’ve found a home and an interest rate that you’re happy with, it’s a good idea to freeze your interest rate as soon as possible.

Mortgage rates go up and down all the time, and when financing a home purchase, even a small increase can cost you thousands of dollars over the life of the loan. Because of this, most buyers choose to lock their rate before closing.

A mortgage rate lock protects you from interest rate changes as long as you close within a certain period of time. Patricia Maguire-Feltch, national sales director at Chase Home Lending, advises that once you’ve found the home you want at an affordable price, lock in the interest rate as soon as possible.

What is a mortgage interest freeze?

A mortgage rate lock guarantees a certain interest rate as you move through the home buying process. Once your interest rate is set, it doesn’t change, which protects you from rising interest rates. However, if the information in your application changes — for example, your credit rating goes down or you lose your job — your installment lock could be voided.

According to Maguire-Feltch, interest locks typically last 30 to 90 days, and you can set a rate up to five days before they close. Some lenders lock your interest rate for 120 days or more.

If you are unable to close before your rate lock expires, you may have to pay an additional fee to extend it. Policies may vary by lender, but a hold interest rate is usually available whenever you buy or refinance a home.

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How does a mortgage interest freeze work?

A mortgage rate lock allows a homeowner to get the best possible interest rate during the home buying process. Your blocking rate is based on the following criteria:

  • down payment
  • closing costs
  • credit-worthiness
  • your loan program
  • The value of your home

Most lenders will let you lock in a mortgage rate once your purchase agreement has been accepted. Some allow you to set an interest rate even earlier, e.g. B. after they have approved your application and prepared a loan estimate.

Your rate lock comes with an expiry date. After expiry, your interest rate may go up or down depending on what’s happening in the market. If you set an interest rate before you sign a contract on a home, you risk expiring before the deal is completed.

Because of this, it’s usually best to wait until you’ve found a home and made an offer before setting your price. The only exception is if interest rates are expected to rise soon.

4 steps to a mortgage rate lock

Setting your interest rate helps you get the best deal possible, especially when interest rates are rising. Here are four steps you can take to get a mortgage interest lock.

1. Find a lender to work with

The first step is to research a few different lenders and choose the one you want to work with. See what kind of loan offers you get and work out your monthly payments with a mortgage calculator. This will help you choose the lender that is right for you.

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2. Ask your loan officer about a fixed interest rate

Once you’ve selected a lender, you can ask your loan officer about a mortgage rate hold. They can explain their policies and provide recommendations on when you should set your tariff.

3. Choose a Rate Lock Period

Next, you need to select a rate lockout period. The length of time you choose depends on whether you have a contract on a house or not. Make sure the hold period you choose is long enough to last until completion – otherwise you may have to pay to renew.

Maguire-Feltch recommends locking in your interest rate soon after you’ve found a home, as mortgage rates often fluctuate.

“Once you find a home that you like and you’re happy with the payment, we recommend setting that rate so you’re sure of what your home loan payments are going to look like,” she says.

4. Lock in your tariff

Once you’re happy with the interest rate and the fixed-rate period, it’s time to fix your mortgage rate. Some lenders let you do this online, or your loan officer can do it for you.

Pros and cons of a mortgage rate freeze

Most borrowers choose to freeze their interest rate because it ensures that they are not stuck with a higher interest rate should market conditions suddenly change. A low interest rate can save you thousands of dollars over the life of the loan.

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However, this means that you may not be able to benefit from falling interest rates. And if you sign up too early, your lender may charge a daily fee to extend it beyond closing. Here are some of the top pros and cons of a mortgage rate lock.

frequently asked Questions

It’s usually a good idea to wait until you have a contract of sale before finalizing your rate. The only exception is when interest rates are unusually low and expected to rise soon.

Most mortgage interest freezes last between 30 and 90 days, but the exact time frame depends on your lender. Some lenders lock your interest rate for 120 days or more.

It is impossible to know what the market will do and there is always a chance that interest rates could fall. For this reason, some lenders offer a float-down option that allows you to reduce your fixed interest rate if market rates suddenly fall.

A float down option offers a little more security in a volatile market and allows you to take advantage of falling interest rates. Maguire-Feltch says you might be able to switch to a lower interest rate without the float-down option, but reducing your interest rate without it may require additional fees.

That depends on your lender. Some lenders charge nothing to fix your interest rate, while others charge between 0.25% and 0.50% of the loan amount.

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