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You are here: Home / Mortgage / How Long Can You Lock In A Mortgage Rate – How And When It Works

How Long Can You Lock In A Mortgage Rate – How And When It Works

October 5, 2020 by Martins Leave a Comment

How Long Can You Lock In A Mortgage Rate – How And When It Works

I would start this by saying you should not let go of a good mortgage rate or let it slip from you. If you are comfortable with whatever mortgage payment you are on right now, then the best advice I can give is to lock in that mortgage rate.

Today, every homeowner wants to have the least possible amount on mortgage rates, and there is a good reason for that too. If there is a small increase in interest rate, then you might have to pay more, so the question is, how long can you lock in a mortgage rate.

A known fact is rated change every morning, and some changes even by the hour, so when you have a good mortgage rate, it would be a good idea to lock it in. The idea is to lock in your mortgage rate when you have a monthly payment that you are comfortable with.

But first, what is a mortgage rate lock? It simply talks about a guarantee from a lender that your interest rates would not experience any rise within a particular period of time. You can ask for a lock extension if your closing mortgage refinance or mortgage loan gets delayed.

Locking in your mortgage rate helps keep you protected from fluctuations that happen every day in the market, and rates can also move up and down while your lender processes and underwrites loans for several weeks.

If locking the rate and the market rates tends to increase, you can maintain your lower rate, but there is still a possibility of losing out if, after locking in the rate, the interest rates start to fall. It can be solved only if your lender activates a float-down option.

How Long Can You Lock In A Mortgage Rate

how long can you lock in a mortgage rate

How Rate Lock Works?

There are about three scenarios that would likely happen after you have locked in your mortgage rate, and they are;

Increase In Interest Rates

If, after locking in your mortgage rates and the interests starts to go up, then this is a win scenario for you because your mortgage rate lock has already offered you protection against an increase in rates. If your loan is still being processed and there is an increase in rates, your lender would not increase your rate while maintaining your lower rates.

Decrease In Interest Rates

If, after locking in and interest rates start to go down, this is not ideal for you because the rate your lender has locked in for you is what you are bound to. There is still a way one can get to take advantage of lower rates even after locking in, and you can achieve this by asking your lender if he can offer a float-down option. The float-down option allows you to keep a lower rate just as they drop before closing.

Interest Rates Remain The Same

If, after locking in your interest rates and remaining the same, then it is the same interest rate that you would still have locked in. Even though this might feel like you wasted some money on locking your mortgage rate, it is still not totally bad because there would not be an increase in your mortgage payment.

One thing we also want you to keep in mind is that it is challenging to predict how the rates will go after you have locked in your mortgage rates, but the truth is rated to move up and down on a few basis point before settling where they initially were when you first began the process.

Why Locking In A Mortgage Rate Makes Sense

Once you lock in your interest rate, you would definitely have some peace of mind and relaxation, and it also helps in budgeting your monthly payment. It is a gamble for you to skip the rate lock because if your rates are still being processed and interest goes high, there might be an increase in your monthly rate.

It would also impact your loan qualification, and it could result in you paying heavily over the life of a loan. It would help if you also had in mind that locked rates tend to change in some cases.

Take, for instance, there is a change in your credit score, you lose your job, or the home appraisal doesn’t correlate with the loan amount, then there would be an increase or decrease in interest rates.

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