3 Questions About Locking In Your Mortgage Interest Rate
Are you in the process of getting a mortgage? One decision you'll eventually need to make is to lock in your interest rate, which protects you from fluctuating interest rates while you continue closing on your new home. Here are some questions you're likely to have about a mortgage rate lock.
How Long Can You Lock In An Interest Rate For?
Every lender will have its own rules regarding how long you can lock in an interest rate. You may be able to lock your rate in for a couple of weeks or a couple of months. The rate lock is typically aligned with your closing date, but won't allow you to keep extending your rate much past that closing date with the initial rate lock. The lender wants to make sure that you close on your home quickly, and limiting the window for a rate lock is one way to encourage you to do so.
However, lenders can make exceptions and offer you a longer rate lock. This is more common when you are building a home, and the timeline until when the home is finished is longer than simply purchasing a home.
What Fees Will You Pay For A Rate Lock?
You will have to pay your lender a rate lock fee for the ability to lock in that interest rate. As you choose a longer rate lock period, that fee will increase as well. That's why many homebuyers choose a rate lock period that is aligned with the closing time on their home. However, you have the option to extend the rate lock as well. There is an additional fee to extend the rate lock if it is necessary.
When is The Right Time To Lock In A Rate?
If you feel like you are going to meet your closing date and like the interest rate that is being offered, then it is a good idea to lock in your rate. It can give you some peace of mind that your interest rate is not going to go up during the days leading up to closing on your home. Some lenders even allow you to float down to the lower rate if interest rates were to drop. This gives you the best of both worlds since you can prevent your interest rate from increasing, but still get the benefits of a lower interest rate if they head in that direction.
Reach out to your mortgage lender for more information on rate locks.