What is a Mortgage Rate Lock & How Does it Work?

If you’re buying a house, you want to get the best deal possible, which means you want the lowest interest rates—the lower your interest rates are, the less you’ll pay over the life of the loan. Buying a house can take a while, though, and in the time it takes you to find the house and go through the buying process, interest rates could rise or fall significantly.

WHAT IS A  MORTGAGE RATE LOCK?

A mortgage rate lock allows a borrower to lock in the current interest rate with their mortgage lender for a specific period of time. When you request a “rate lock,” you ask your lender to guarantee a specific interest rate on your mortgage loan for a set amount of time. You can usually have your rate locked for free and once the lock is in place, your rate will remain stable despite increases or decreases in the market.

HOW WILL A RATE LOCK HELP ME?

Locking your mortgage rate can of course help by allowing you to take advantage of low rates. It can also help you budget for the purchase because when you know the amount and the rate, you can determine what you’ll have to pay each month and whether you have enough cash flow to cover costs.

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WHAT IF I DON’T GET A MORTGAGE RATE LOCK?

Without a rate lock, the interest rate on the mortgage will “float,” increasing or decreasing without any cap. Most loan processes take between four and six weeks, which is enough time for substantial fluctuations in the market. If you decide to float, the interest rate would be set 10 business days prior to closing.

ONCE I LOCK IT, CAN I UNLOCK IT?

Once you lock in your rate, it is locked until closing. The loan program cannot be changed, nor can the rate go up or down during the rate lock period, including any extensions. In addition, the loan amount cannot be changed by more than $10,000 in either direction.

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About Tammy Farnham

With over 26 years of credit union experience, Tammy Farnham is a mortgage originator who serves the mortgage needs of Vermont families in Northeastern and Central Vermont, including Essex, Caledonia, Orange, Orleans and Washington Counties. Tammy enjoys helping Vermonters with their financial needs and assisting borrowers with their mortgage needs. Tammy grew up in Plainfield, where she currently lives with her husband and two grown children. She spends her free time helping with her family business, Farnham Farm Maple Sugaring. She likes to do crafts and gardening and spend time with family, friends, and her dog Callie.

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