Mortgage rates are constantly fluctuating, and that can cause stress for Orem homebuyers who are looking to secure the best deal. If you’re concerned, one potential solution is to lock in your interest rate.
A mortgage rate lock can provide you with protection against rising interest rates – if, that is, it remains in effect until closing. Here, the professional team at Intercap Lending takes a look at what it means to lock in your rate, how much it costs and when it makes sense to take the leap.
How Do Mortgage Rate Locks Work?
A rate lock is a commitment by a mortgage lender to keep the interest rate offered for a set period of time – typically 30, 45, 60 or 90 days.
Once you’ve locked in your rate, it won’t go up. Then again, if mortgage rates drop, you only benefit if your lock includes a float-down option. That would allow you to take advantage of a lower rate, but you’ll likely have to pay an additional fee.
What Does a Mortgage Rate Lock Cost?
With some Utah mortgage lenders, you’ll be charged a fee for a rate lock. Others have no separate fee, as the cost is simply built into the terms offered.
In any case, the price for locking in a mortgage rate is generally dependent on the length of the lock period. So, the amount for a 60-day interest rate lock will almost certainly be more than the fee for a 15-day lock.
What if the Rate Lock Period Expires?
If you don’t close within the specified time frame, you may be able to extend the rate lock, but you can expect to pay between .25 to one percent of the loan principal.
That said, Utah mortgage lenders aren’t required to allow extensions. In the event yours doesn’t want to extend your lock period, your home loan will be processed with the current interest rate.
When is the Right Time to Lock In Your Rate?
As a homebuyer, you can lock in a mortgage rate once the seller accepts your offer and your home loan application has been approved.
If the rate you’re offered is rather favorable, you may be tempted to get it locked right away – but don’t do so unless you’re reasonably sure the time period won’t expire before closing. Otherwise, your home loan costs will likely rise.
Would you like to learn more? The friendly and knowledgeable mortgage professionals at Intercap Lending are always happy to answer questions and share advice on getting through the home loan process. To discuss mortgage rate locks with a trusted expert, contact us today!