Lock Your Rate

lock your rate smYou may lock-in your interest rate at any time after the sales contract has been accepted by the seller. By locking-in an interest rate, you are guaranteed that interest rate despite any market fluctuations that may occur.

Interest rates are locked for a determined period of time. Typically, the longer a lock period is, the higher the interest rate may be. The lock period must be long enough to extend past the anticipated closing date. It is also a good idea to give yourself extra time for your lock period to insure against any delays with your closing, especially if you are selling your current home before you close on your new house, or if you are building a house.

Sometimes factors such as weather (for those building a new home) and complications with the buyers of your current home can delay your closing beyond the anticipated date. If you aren't prepared for these eventualities, your interest rate lock may expire. If this occurs you may be subject to an increase in your interest rate (if interest rates have increased since the date of your lock-in).
When you lock-in your interest rate, you and your lender are obligated to that interest rate. If the interest rates increase after you lock-in, the lender must provide the locked-in interest rate. If rates decrease after you lock-in, you are obligated to close at the locked-in interest rate.

A form that you and your lender both sign confirms the terms and conditions of the lock-in.

Your interest rate lock-in is tied to your social security number and the address of the property you are buying. If you lock-in to a rate for a specific property and you don't end up buying that property, you will lose your interest rate lock-in. The rate lock-in cannot be transferred to another property.

NOTEIn some cases borrowers choose to float an interest rate. By doing so, they are accountable to any movements in the market. If interest rates increase after they agree to float the interest rate, they receive the higher interest rate. If interest rates decrease after the date they decide not to lock-in, they receive the benefit of the lower interest rates. This is more risky than locking in your interest rate.