Locking In Your Mortgage Rate: Why and When to Lock it

When you're on the path to buying a home, one of the most important decisions is whether to lock in your mortgage rate. But what exactly does that mean, and why is it such a big deal? Let’s break it down.

What Is a Mortgage Rate Lock?

A mortgage rate lock is like making a reservation at your favorite restaurant on a busy night. It’s a guarantee that they'll give you a specific interest rate for your mortgage, even if rates go up while you finalize your loan. Think of it as locking in today’s deal so you don’t have to worry about tomorrow’s changes.

How Does a Rate Lock Work?

Imagine you're shopping for a mortgage, and you find an interest rate that fits your budget. If you’re concerned that rates might increase, you may be able to lock in that rate. This means that even if interest rates rise while your loan is being processed, you’ll still get the lower rate you locked in.

But, just like with any good deal, there’s a time limit. Rate locks usually last for 30, 45, or 60 days—sometimes more, sometimes less. If your loan isn’t finalized within that period, the lock expires, and you could pay a higher rate.

Should You Opt for a Longer Rate Lock?

You might think, “Why not just choose the longest rate lock available to be safe?” It’s a valid thought, but there’s a bit more to consider. While a longer rate lock gives you more time and peace of mind, it might come with a catch—like a slightly higher interest rate or an extra fee.

The general advice is to go for a lock period that comfortably covers the time you need to close on your loan. If you expect delays, a longer lock could be worth the potential cost. But always weigh the pros and cons with your mortgage professional's help.

What If Rates Change After You Lock In?

Here’s where things get interesting. If rates go up after you lock in, you’re in luck—you’ll still pay the lower, locked-in rate. But if rates go down, it’s usually a different story. In most cases, you’ll be stuck with the higher rate you locked in, even if better deals come along later.

However, you may have the option to “float down” the rate, which allows you to take advantage of lower rates if they drop during your lock period. But note that this option often comes at a cost, and you’ll need to decide if it’s worth it's worth it. 

What About the Cost?

Sometimes, locking in your rate is free, especially for shorter periods. But for longer locks, a fee might be involved—usually a small percentage of your loan amount or a flat fee. Some loan options allow you to roll the cost into your interest rate. It’s always a good idea to ask your mortgage professional about any potential fees upfront so you’re not caught off guard.

Is Locking Your Rate Right For You?

Locking in your mortgage rate can offer great peace of mind during the home-buying process. By securing a rate, you protect yourself from rising costs, but it’s crucial to understand the terms and timing involved.

Make sure to discuss your options with your local mortgage pro so you can lock in a rate that works best for you and keeps your home-buying journey on track.