Mortgage Rate Lock: Should I Lock my Mortgage Rate Today?

March 12, 2020 | 2 min read | The mortgage process

With mortgage rates currently at all-time lows, many people may be wondering, “When should I lock in my mortgage rate?” Mortgage rates fluctuate often, so we recommend locking in a rate to preserve the quoted rate if the monthly payment fits within your budget.

What does Locking in a Mortgage Rate Mean?

A mortgage rate lock is a guarantee* from a mortgage lender stating that you will receive a certain interest rate for a specific amount of time. A rate lock essentially freezes the interest rate for a specified time and protects the borrower’s interest rate from changing with daily rate movements.

*Rate lock policies may vary by lender

How Long can you Lock in a Mortgage Rate?

Typically, a rate lock period is for 30, 45, or 60 days. Depending on the type of loan program, the rate lock period may extend beyond 60 days.

  • At what point of the mortgage process do you lock in a mortgage rate?

The time at which you lock the rate will depend on the lock period. Once approved for the program, borrowers will typically lock in an interest rate when comfortable with the estimated monthly payments.

It is important to note that a rate lock is void if any information on the application, such as the appraisal, credit score, or income changes.

What Happens if your Mortgage Rate Lock Expires Before Closing?

If the mortgage rate lock expires before you close on your loan, you may negotiate a rate lock extension or accept the current market rate. If you take the current market rate, your rate will float and change with daily interest rate movements. The mortgage lender will monitor your rate lock period with the processing time frame to avoid any possible expirations or extensions.

What Happens if Rates Change During the Rate Lock Period?

Since a rate lock freezes your interest rate, your rate is protected from rising if mortgage rates increase. On the contrary, if mortgage rates full during the lock period, your rate will not automatically decrease since it is frozen. However, if rates fall below your locked rate, you may be able to take advantage of a lower rate during your rate lock period with a “float down” option.

What is a “Float Down” Option?

A “float down” option is an agreement between you and the lender after your rate is locked, which allows you to adjust to current market rates for a small fee. The lender will advise you on whether the monthly payment savings associated with a lower rate outweigh the cost to “float down.”

How to Decide Whether to Lock or Float your Rate?

Typically, lenders inform borrowers to float when rates are steadily decreasing each day or week and will advise to lock-in a rate closer to the closing. However, according to The Mortgage Reports chart below, experts predict interest rates to rise in the next 90 days. With rates at historic lows, now is a great time to purchase or refinance your current mortgage and lock-in a low rate and take advantage of significant monthly savings!

At GuardHill, we will always make sure you are well informed throughout the entire mortgage process and guide you through the mortgage rate lock process.