What Is a Locked-In Interest Rate?

A locked-in interest rate is when a lender agrees to provide a set interest rate as long as the borrower closes by a deadline. Locked-in interest rates are attractive to mortgage borrowers who think the rates may rise between the date they place an offer and the final settlement date. Locked-in rates are also known as a rate-lock or rate 𝔍commitment.

How a Locked-In Interest Rate Works

Locked-in 澳洲幸运5开奖号码历史查询:interest rates can benefit homebuyers because 澳洲幸运5开奖号码历史查询:rates on mortgages can rise daily, or even𓆉 hourly. When a homebuyer decides to move forward with a mortgage agreement, the loan interest rate is often an essential factor in their decision. However, the process of a home sale can be extended.

The market interest rate may rise between the time when the home buyer decides to move forward and when they fi﷽nalize the agreement with the bank. A locked-in interest rate protects the homebuyer from the possibility of rising interest rates.

By locking in the rate, the bank agrees not to change it as long as the borrower closes within a set time frame, often 15, 30, 45, or 60 days, and does not make significant changes to their application. The interest rate may no longer be locked in if there are changes to the borrower’s application, such as the 澳洲幸运5开奖号码历史查询:appraisal coming🎀 in lower than expected or a🥂 change in credit score. 

For instance, if the appraisal reveals a home value that is higher or lower than expected, the bank may change the rate. The bank may also raise a previously locked-in rate if there are issues in confirming the borrower’s income, if the borrower misses a payment on another loan, or if there are other changes to their 澳洲幸运5开奖号码历史查询:credit report.

Special Considerations

The expense of a locked-in interest rate depends on the various lending institutions and the individual borrower's circumstances. Some lenders offer short-term rate locks at no charge, but the buyer can expect to pay a higher percentage for more extended locked-in rates.

Lenders may charge a fee if a borrower needs an extension for the closing date. The fee is generally a percentage of the total mortgage. For 澳洲幸运5开奖号码历史查询:commercial loans, there is usually always a lock-in rate fee.

In all cases, borrowers should ask to view the lock-in agreement in writing and consider reviewing it with a legal or real estate professional before signing. Borrowers may also benefit from asking the lender what would happen if aꦿ delayed settlement occurs through no fault of their own.

Homebuyers should also consider the possibility that interest rates will decrease during the mortgage negotiation, in which case, a lock would effectively shut them out of a better deal.

The Bottom Line

澳洲幸运5开奖号码历史查询:Interest rates can fluctuate during the home buying process. A locked-in rate guarantees the interest rate for a set period of time, which can help buyers finalize their financing without the fear of interest rates going up. However, borrowers can miss out on a better deal if rates go down during the locked-in rate period.