What is an interest rate “lock-in”?
If you decide to apply for financing with a particular lender, and if you do not want to let the interest rate “float” until closing, get a written statement guaranteeing the interest rate and the number of discount points that you will pay at closing. This binding commitment or “lock-in” ensures that the lender will not raise these costs even if rates increase before you settle on the new loan. You also may consider requesting an agreement where the interest rate can decrease but not increase before closing. If you cannot get the lender to put this information in writing, you may wish to choose one who will. Most lenders place a limit on the length of time (say, 60 days) they will guarantee the interest rate. You must sign the loan during that time or lose the benefit of that particular rate. Because many people are refinancing their mortgages, there may be a delay in processing the papers. Therefore, contact your loan officer periodically to check on the progress of your loan approva
Mortgage interest rates can change hourly or daily depending upon market conditions. An interest rate lock-in is a written agreement between you and your lender covering the terms of your loan. If you have decided that you will float your interest rate, this too should be stated in writing. If you have determined that you wish to lock in a particular rate, the lock-in agreement should typically state: the loan product, term, loan amount, subject property address, origination and/or discount points, lock-in period and lock expiration date. A lock-in agreement should protect you in the event interest rates rise, as long as you close your loan within the stated lock-in period. It is very important for consumers to closely read the lock-in agreement and ask the mortgage lender to explain the terms of the lock. Consumers should clearly understand any conditions under which an interest rate lock could be lost. In most cases, if interest rates fall, you will generally be bound by the terms of
