What is the difference between locking or floating my interest rate on a traditional residential real estate first mortgage loan?
Both options require that the interest rate be locked, only floating allows the rate to be locked until the last possible moment. A loan rate must be locked before final loan papers may be drafted. You as a consumer, may wish to lock an interest rate prior to drafting final loan papers. Advance locks may be processed as soon as the initial application is taken guaranteeing a rate of interest that wont change during the processing period. Although advance locks offer a level of security, the down side is if interest rates fall, the borrower is locked in at a rate above current market rates. When floating the interest rate for any amount of time, the borrower takes the risk of interest rates increasing during the period from application to the time of lock-in. The downside to this, of course, is if interest rates increase during this time, the borrower is subject to the then current higher interest rates. The benefit would then be if interest rates went down, the borrower would have the
Related Questions
- On a traditional residential real estate first mortgage loan, aren there really just two kinds of mortgages: fixed and adjustable rate?
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