Mortgage interest rates can change daily, sometimes hourly.
A rate lock is a guarantee from a mortgage banker that they will give you a certain interest rate at a certain price for a specific period of time. If you’ve been wondering when the best time is to lock in a rate, what rate lock period you should choose and other common questions, we can help!
- When should you lock your rate? For many people, it makes sense to first sign a purchase agreement on a specific property before trying to lock in a mortgage rate. For others, they feel more confident in their search when they are locking into a good rate. When locking a rate, it’s crucial to make sure the duration of your lock will give your mortgage banker enough time to process the loan and fulfill the time frames specified by your potential purchase agreement.
- How long can I lock in my rate? Starion offers a rate lock of five days all the way up to one year, depending on the type of loan. Ask your mortgage banker about the differences in cost and rates for various loan types and duration periods.
- Does it cost money to lock in your rate? This varies from paying no fee, to a flat fee or a percentage of the total mortgage amount. Typically longer-term rate locks cost more.
- What if the rate goes up or down after you lock in the rate? If interest rates rise during your lock-in period, you will be able to rest easy that you already locked in your low rate! But if you lock in a rate and then rates drop, you typically aren’t able to take advantage of those lower rates either.
When buying or building a home, every situation is unique. The interest rate can mean the difference between a home being within or out of your budget. The time to lock in a loan depends completely on your individual circumstances, so work closely with your mortgage banker to make the decision that best fits your needs and budget.