Mortgage rates are always moving up and down as the day passes on. These changes can be of significant benefit to you because they could actually help you save money. However, if the price changes are not in your favor, then you could be on the hook for more money.
That is why some people choose to go with a rate lock. This is an offer by a lender to keep a mortgage rate steady for a period of time in exchange for a fee. The actual duration can vary based on the mechanics of the deal, but it means that the actual rate will not change.
These types of locks can be voided if there are changes to the information on your loan application, or if the actual loan changes.
Keep these important facts about a mortgage rate lock in mind if you are thinking about securing one.
You should think about locking your mortgage rate if you are approved for a comfortable loan that has a good monthly payment for your budget. This type of situation is a good one for you and you should take advantage of it, as it is pretty much impossible to try and speculate about when and if a rate will change.
Once locked, you are able to enjoy a locked rate for a variety of time. Some people choose to have one for a month, while others wish to take on a locked rate for a longer period of time. Just make sure to ask your lender about possible time periods and then plan for the ensuing rate change.
If your lender does not offer a rate lock once your application has been approved, you have the option to ask them about one. Just make sure you know what you’re getting into. If rates stay the same during your lock, then you are paying a fee for something that really did not help you. But if rates go up, you’re getting a good deal.
However, some lenders make it possible for you to have what’s called a mortgage rate float down. These let you get a lower mortgage rate after a lock if the opportunity presents itself. If you are interested in something like this, make sure to speak with your lender, as the details of these type of schemes are going to vary widely.
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Overall, most lenders will charge for a rate lock, while others will sometimes offer one for free. But keep in mind that these types of ‘free’ services are most likely just passed on into the actual rates you are being offered. If you do go for a rate lock, make sure you understand the fee structure since it can depend on the amount and terms of the actual loan.
It is up to you to decide if a mortgage rate lock is worth it. They can be a good way for you to protect yourself from rising interest rates if you are willing to pay the fee, as long as you understand the risk that the rates could go down during your lock.
Be sure to speak with our experts. A good mortgage rate lock is not going to help you if the actual terms of your mortgage is not a good deal in the first place.
Do you have a question about mortgage rate locks? Call the Reed Team today at 949-392-6400!