What is a rate lock fee?

A mortgage rate lock is an agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage for a specified time period at the prevailing market interest rate. The lender may charge a lock fee, which the borrower must pay if they do not lock the interest rate.

Is a rate lock fee worth it?

A rate lock ensures that they won’t. That’s when a rate lock is well worth the price. If mortgage rates go down: Rates may also go down before your closing. Unless you have a one-time “float down” option on your lock (see below), you’ll miss the lower rate.

What happens when you lock in a refinance rate?

A mortgage rate lock, also known as rate protection, keeps your interest rate from rising between the time you apply for a refinance and the time you close on your new loan. If interest rates happen to go up during the period when your rate is locked, you get to keep your lower rate.

Are Rate lock fees refundable?

A rate lock fee is a fee that allows a borrower to lock their rate but that fee is not refunded at closing. This term denotes a locked rate which extends beyond the typical 60-90 days offered by most lenders.

Can I walk away from a rate lock?

You can back out of a mortgage rate lock, but there are consequences. Backing out of a rate lock means giving up the application you’ve put time and money into. You’ll have to start your mortgage application over from the start, and you’ll likely have to re-pay fees like the credit check and home appraisal.

How long does a rate lock last?

30 to 60 days
Rate locks typically last from 30 to 60 days, though they sometimes last 120 days or more. Some lenders do offer a free rate lock for a specified period. After that, however, even those generous lenders may charge fees for extending the lock.

Can you change a rate lock?

Yes, you can change lenders after locking a rate. But you’ll have to start the application process over with your new lender. That means getting pre-approved, submitting all your documents, and waiting for underwriting — twice.

Is a rate lock legally binding?

Both the lender and the borrower agree to the terms of the rate lock. It is not a legally binding agreement, however, in obtaining a loan. In some cases, borrowers may elect to walk away from the rate if interest rates fall. Locking in a rate allows the borrower and the lender to agree to specific terms of a loan.

How many times can you extend a rate lock?

How long can a rate be locked? Historically, lenders have locked in rates for 30 to 60 days. After that, the borrower might have to pay a fee to extend the rate lock. The extension can be for 90 days to as many as eight months, depending on the lender.

When to lock in a mortgage rate?

The best time to lock your mortgage depends on a few things. If rates are rising, you may want to lock in a rate as soon as you have a signed purchase agreement. If rates are steady, you might wait until 10-15 days of closing to lock in.

What happens when a mortgage rate lock expires?

Both you and the lender take on risk when you lock. Your mortgage rate lock expires in a certain number of days — seven, for example, or 15, 30, 45, 60 or longer. If your lock expires, you have to re-lock or extend your lock before you can close.

What’s a lock-in or a rate lock on a mortgage?

A rate lock is a guarantee from a mortgage lender that they will give a mortgage loan applicant a certain interest rate, at a certain price, for a specific time period. The price for a mortgage loan is typically expressed as “points” paid to obtain a specific interest rate.

Should I lock interest rate?

Mortgage lenders are often asked if there is a best time of day, day of the week, or period of the year when a prospective borrower should lock in a mortgage interest rate. The truth is, no one can tell with any degree of accuracy what rates will do. In fact, the best time to lock a mortgage is when the unexpected happens.