Mortgage Lock-ins: Questions To Ask
A mortgage rate lock is a lender's promise to hold a particular interest rate and terms for you for a set period while your loan is processed. It protects you if market rates climb before closing, but the details vary a lot from lender to lender. These are the questions to ask before you lock.
How long does the lock last?
Locks are offered for different periods, often tied to how long it takes to close. Choose one long enough to cover your expected closing date, with a cushion for delays. Longer locks may carry a higher rate or a fee.
Is there a fee, and is it refundable?
Some lenders include the lock at no cost, while others charge a fee or require a deposit. Ask whether the fee is credited to your closing costs at settlement and whether it is refunded if the loan does not close.
When can I lock?
Some lenders allow a lock at application. Others require a signed purchase contract or a specific property. Ask about the timing and whether you can lock before you have chosen a home.
What if rates fall after I lock?
A standard lock keeps your rate where it is, even if the market improves. Some lenders offer a "float down" option that lets you take a lower rate once, usually for a fee or under conditions. Ask whether it is available and exactly how it works.
What happens if my closing is delayed?
If the lock expires before you close, you may have to pay an extension fee or accept the current market rate. Ask what the extension costs, and who bears the cost if the delay is the lender's fault.
What conditions could void the lock?
A lock typically assumes that the information on your application is accurate and unchanged. Changes in income, employment, credit, the property appraisal, or the loan amount can affect it. Avoid opening new accounts or making large purchases before closing.
Does the lock cover points and fees?
Make sure the lock covers the rate, the points (prepaid interest paid to reduce the rate) and the type of loan. Ask for the lock confirmation in writing and compare it against the loan estimate you receive.
Should I lock or float?
No one can predict rate movements reliably. If a higher payment would stretch your budget, locking provides certainty. If you wait, you accept the risk that rates will rise. The Consumer Financial Protection Bureau explains the process at consumerfinance.gov.
Tax note
Points paid to obtain a mortgage on a primary residence may be deductible, with conditions, if you itemize. Keep your closing documents for your tax records.
If you are buying or refinancing, we can help you understand how the loan affects your overall finances. Contact our firm to talk it over.
This article is general information, not tax, legal or investment advice for your specific situation.