Can You Lock Your Mortgage Rate?

When applying for a mortgage, one of the key factors that determines the affordability of your loan is the interest rate. Mortgage rates can fluctuate frequently, sometimes changing multiple times between when you apply and when you close on the home. This uncertainty around rates can create stress and confusion during an already complex homebuying process. 

Can you lock your mortgage rate? Yes, you can lock your mortgage rate. This is a process where the lender and borrower agree to secure a specific interest rate for a set period of time, typically between 30 and 90 days. It protects the borrower from potential increases in interest rates during the homebuying process but may involve fees if extended or broken.

To provide more certainty around mortgage costs, lenders offer borrowers the option to lock in an interest rate. A mortgage rate lock allows you to secure a rate for a set period of time, protecting you from increases if rates go up.

Locking in a rate can provide useful protections and peace of mind. However, rate locks also come with some limitations and potential drawbacks to consider. In this article, we’ll explore what mortgage rate locks are, how they work, and when it may or may not make sense to utilize one.

What Is a Mortgage Rate Lock?

A mortgage rate lock, also called a rate lock or rate protection, is an agreement between a lender and a borrower to secure a specific interest rate for a set period of time. 

When you apply for a mortgage, you will receive a loan estimate from the lender outlining the estimated terms, including the rate, closing costs, and other fees. At this point, the lender may give you the option to lock in the rate listed in the loan estimate. 

If you opt to lock in the rate, the lender guarantees that the rate will remain the same through your closing date, even if market rates increase. This protects you from having to accept a higher interest rate at closing than you qualified for initially.

How Does a Mortgage Rate Lock Work?

When you lock in your mortgage rate, you enter a legally binding contract with the lender to hold the rate for a predetermined lock-in period. This period is usually between 30 and 90 days.

During the lock period, you agree not to shop around for a lower rate with other lenders. The lender agrees to honor the locked rate as long as your loan closes before the lock expires, provided your financial situation and the home’s appraisal come back as expected. 

If your loan does not close before the expiration date, you may have to pay an extension fee to keep the locked rate, or you may have to accept the market rate at closing.

When Can You Lock Your Mortgage Rate?

Can I Lock in My Mortgage Rate With More Than One Lender?

It’s recommended that you get rate lock quotes from multiple lenders before deciding. However, you can only lock in a rate with one lender at a time. 

If you want to change lenders after locking in, you would need to cancel your existing rate lock, which may involve fees, and start a new lock with the new lender.

How Long Does a Mortgage Rate Lock Last?

Typical mortgage rate lock periods range from 30 to 90 days. Shorter lock periods around 30 days carry less risk for lenders, so may be more readily available. However,longer lock periods of 60 or 90 days give you more protection in case of delays.

Ask potential lenders about their standard lock periods. A longer lock, such as 60-90 days, can provide more protection during a complex transaction.

What Is the Cost of a Mortgage Rate Lock?

Many lenders provide a free rate lock for a certain period when you fill out their mortgage application. However, if you ask for an extended rate lock, there is often an upfront fee that must be paid.

These fees are based on market conditions and the lender, but often range from 0.25% to 1% of the total loan amount.

What Are the Different Types of Mortgage Rate Locks?

There are a few different variations of rate locks that provide different degrees of flexibility:

• Float-down lock – Allows you switch to a lower rate if rates fall before closing. May carry an additional fee.
• Lock and shop – Locks rate while you continue to shop with other lenders. Usually carries a fee.
• One-time lock – Basic lock with single rate and term. No modifications allowed.
• Extended lock – Locks rate for longer than normal period for a fee. Protects against delays. 
• Re-lock – Allows a one-time re-locking at current rates if initial lock expires. Fee usually applies.

What Are the Advantages of Locking Your Mortgage Rate?

There are a few key benefits that a rate lock provides:

1. Protection Against Rising Interest Rates

The main advantage of a rate lock is protecting you if market rates go up significantly before closing. This prevents you from having to accept a higher rate or make a larger down payment.

2. Budget Planning

By locking in your exact rate, you know precisely what your monthly mortgage payments will be. This helps with budgeting when you plan to buy the home.

3. Peace of Mind

A rate lock provides certainty in what can be a stressful process. You won’t have to worry about market fluctuations impacting your loan late in the transaction.

What Are the Disadvantages of Locking Your Mortgage Rate?

While rate locks can provide useful protection, there are also some potential drawbacks:

1. Missed Opportunities for Lower Rates

If rates fall before you close, you could miss out on saving money with a lower rate. You’d be stuck at the higher locked-in rate.

2. Fees for Extending or Breaking the Lock

You may have to pay fees if your lock expires before closing and you need an extension. Or if you want to break the lock to get a lower rate elsewhere, penalties may apply.

How Long Can You Lock a Mortgage Rate for?

Most lenders provide rate locks for 30 to 90 days. Some may allow extensions up to 120 days for an additional fee. Extensions beyond 120 days are rare.

Opting for a longer initial lock period around 90 days can give you more protection from delays and avoids the need to pay extension fees. Just know that longer lock periods may come with a slightly higher rate.

What Happens if the Locked Period Expires Before Closing?

If your rate lock expires prior to closing, you have two options:

Pay an extension fee – Usually around 0.25-0.5% of loan amount for 30 days. Can extend one or more times.

Accept market rate – Current rate offered by lender, which could be higher or lower than original locked rate.

If an extension isn’t feasible, taking the market rate may make sense if it’s close to your expired lock rate. Just know your new monthly payments.

How to Request a Mortgage Rate Lock?

You can request to lock in a rate as soon as you receive an official loan estimate from your lender with estimated terms. Lock periods range from 30 to 90 days.

To lock in, contact your loan officer directly and ask to lock in the interest rate listed in your loan estimate. The lender will generate a rate lock agreement. Review terms carefully before signing. 

Locking in as soon as possible protects against imminent rate increases. Just confirm your lock period provides enough time for your transaction.

What Factors Should Be Considered Before Deciding to Lock Your Mortgage Rate?

Here are some key considerations when deciding whether to lock your mortgage rate:

• Market trends – Are rates trending up or down? Locking is best if rates rising.
• Closing timeframe – Lock period should cover time until expected closing date.
• Loan type – Adjustable rates vary, so locks matter more for fixed rates. 
• Change flexibility – Assess fees to extend/break lock if delays happen.
• Peace of mind – Lock provides rate certainty during stressful time.

Talk to your loan officer about your specific scenario. They can provide guidance based on your loan, timeline, and risk tolerance.

Can You Unlock or Change a Locked Mortgage Rate?

Once a rate is locked, you enter a binding contract with the lender at that set rate. However, depending on your lock terms, you may be able to:

• Float down to a lower rate if rates fall.
• Extend your rate lock for a fee if initial period expires.
• Cancel and re-lock at current, possibly higher or lower rates for a fee. 
• Make minor changes to your loan that don’t impact your rate.

Breaking your lock or letting it expire can lead to fees or a worse rate though. Carefully review lock terms first.

Which Type of Mortgage Rate Lock Is Right for Me?

Choosing the right lock option depends on your situation:

• Float-down lock – Best if you expect rates to fall and want flexibility.
• Short lock – 30 days provides basic protection if you close quickly. 
• Long lock – 60-90 days protects against delays if you have a complex transaction. 
• Lock and shop – Keep shopping after locking if not satisfied with lender.
• No lock – Take a gamble rates won’t rise drastically before you close.

Discuss the different lock types with your lender to select the right option based on your priorities and situation.

Conclusion

Locking in a mortgage interest rate is an option that provides stability during the ups and downs of the home buying process. By securing a rate for 30 to 90 days, you are protected from increases if market rates rise.

However, rate locks also limit your ability to take advantage if rates fall before you close. And you may incur fees if you need to extend a lock due to delays.

Carefully weighing the benefits against the potential limitations for your specific situation can help determine if locking makes sense in your home purchase. Being informed on the process and having open discussions with lenders makes it more likely you end up with ideal mortgage terms.

FAQ

What Happens if I Close on My Home Before My Mortgage Rate Lock Expires?

If you close on the home before your rate lock period ends, you simply get to keep the locked rate you originally agreed to. Even if market rates have changed, your lender must honor the locked-in rate from the initial rate lock agreement.

What Happens if Interest Rates Fall After I Lock in My Mortgage Rate?

Unfortunately, if rates decrease after you lock in your mortgage rate, you will be stuck at the higher locked-in rate. Your lender is not obligated to let you re-lock at the new lower rates. 

You would need to pay any applicable fees and penalties and cancel your current mortgage application to try and take advantage of the lower rates. This may not always be possible close to closing.

What Are the Different Types of Mortgage Rate Locks?

The main types of mortgage rate locks include:

• Float-down lock – Rate can float down with market if rates fall.
• Lock and shop – Lock rate while continuing to shop lenders. 
• Extended lock – Locks rate for longer period, such as 90 days.
• Re-lock – Re-lock at current rates if initial lock expires.
• One-time lock – Basic lock with fixed rate and terms.

Discuss the different lock types with your lender to choose the option that fits your homebuying situation and priorities.

Frequently Asked Questions(FAQ)