What Is a Mortgage Rate Lock?

A mortgage interest rate lock is when your lender freezes the current interest rate available to you based on your pre-approval. This means that if rates go up, your interest rate will stay the same. Since interest rates tend to fluctuate, a rate lock can provide peace of mind while home shopping or while under contract. Lenders may charge a fee to lock in your rate, and the lock period typically lasts thirty days. An additional fee can extend that duration.

When Can You Lock In Your Rate?

Some lending institutions have the option to lock your rate as early as after you apply. While others only offer a mortgage rate lock when you submit an offer or go under contact. Programs sometimes referred to as ‘lock and shop’ exist, allowing you to lock your rate while you house shop. Each lender is different, so it is best to talk to your lender about their mortgage interest rate lock guidelines and fees.

The Pros of Rate Locks

• If rates go up, yours doesn’t
• Peace of mind while you shop or are under contract
• Saves you money on interest payments over the life of your loan when you close with a lower rate

The Cons of Rate Locks

• If rates go down, yours will stay the same
• Some lenders may have the option to lower your rate if rates go down, but there is usually a fee to lower your rate
• If the current rate is lower than your locked-in rate, and you can’t lower your rate, you’ll pay more towards interest over the life of your loan

When Should You Lock In Your Rate?

Locking in your rate is a conversation you should have with your lender. Understanding fees and rate lock timelines will help you decide if a rate lock is best for you. If you choose to lock in your interest rate, your lender will help you determine the best time to lock it in.

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