April’s Real Estate Corner

Lots of buyers talk about “locking in” their rate, but are they actually saying the right thing?  A mortgage rate lock freezes your interest rate after your loan is approved until the loan is closed.

            Rate locks can be useful in times of rising interest rates. If interest rates rise, you are protected at a lower rate.  Of course, in any single month, interest rates ping-pong up and down, but if you are afraid mortgage rates will jump in the period between your loan approval and closing, a rate lock could at least give you peace of mind. Some lenders offer them, others don’t.

            Rate locks are not free — even if you aren’t directly charged for them. Some lenders might offer a free rate lock, but the cost is merely calculated into the rate you are offered.

            Direct fees for rate locks vary quite a bit. Some lenders will calculate the charge based on basis points and the lock is only good for a certain amount of time.

            Rate locks can span periods of 30 to 60 days for conventional mortgages. If you pay for one, be sure to promptly answer requests for information. You don’t want any delays in processing or underwriting.

            One warning: Be absolutely sure the information on your application is correct and your personal financial position doesn’t change. Also, if you change your mind about the terms of the loan (length of time or type of mortgage), the lock could be voided.


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