One of the heartbreaking moments in the mortgage is locking in a mortgage rate, and the rate eventually goes down. Have you thought of the possibility of rates falling further even after locking a mortgage rate?
What happens when you fail to lock and suddenly the rate increases? Is it possible for you to unlock or do a do-over? The truth is you can’t unlock an interest rate and lock again after monitoring market rates, but we want to show you what you can do if you lock in a mortgage rate and the rate goes down.
If You Lock In A Mortgage Rate And The Rate Goes Down
One option you have is talking to your lender about float options if you are already locked in a mortgage rate. There is still a possibility that you can use this strategy to reduce your rate before it enters its closing.
Changing a lender’s option at the last minute is also a great plan, but the drawback of this plan is it takes you back to square one, meaning you have to start all over again. This is why you must apply caution and care when making decisions and ensure your new rate is quite low to be worth everything.
Most people still do not know or do not clearly understand what it means to lock in a mortgage rate. Locking in a mortgage rate means agreeing to cost structure and interest rate, which binds the lender and you.
Payment plan, fees, and annual interest rates are what make up a mortgage rate lock, and you should also know that it is impossible to close on a home loan without having to lock in your interest rates. You must do this, even if it means waiting an extra hour for the lender to print the final documents.
The agreement of a mortgage rate lock includes;
- An interest rate
- The specified date tells you the expiration date of your agreement
- Specified mortgage program
- Cost of your rate
Another thing is not all mortgage lenders are interested in having all of their agreements in writing, but you must do so. This agreement can be written in person, signed, and sent through fax, or you can use an electronic signature service like DocuSign. It is very important to document that you locked in a specific rate for a particular number of days. This gives a clear understanding of what you are committing yourself to.
How To Get A Lower Rate After Locking
A mortgage rate lock means having a commitment between the lender and you, and as long as you stick to the date agreed upon to close, there is nothing the lender can do to alter your rates, and this also includes sudden skyrocketing your rates.
This is to the advantage of every borrower unless the commitment goes two ways. However, if there is a sudden fall in rates, you can’t withdraw from a rate lock and hope that the lender would provide you with a lower interest rate in return.
There are actually two proven ways to get a lower rate after locking in with a lender, and the rates suddenly fall. These two ways include;
Ways To Get Lower Rate After Locking
- Asking your lender for float options – this would, however, warrant a borrower to pay an additional fee when closing in exchange for a current lower market rate.
- Canceling of loan application and switching lenders – this involves quitting your lender and starting with another lender that has a better and lower rate to offer
Both of these strategies come with massive benefits and huge risks as well. It is either you face so much paperwork, a big delay, or a high float-down cost. However, if what you have saved from while locking in a lower mortgage rate is large enough, then the two strategies mentioned above can actually be worth it.
Most people would be surprised after reading this and realizing that they can switch lenders despite locking in a mortgage rate. The big question is, should you?
Well, if you are looking to refinance your home, then the answer to that question is yes. However, if you are buying and not refinancing, then the answer to that question is no.