The Benefits of Locking in Mortgage Interest Rates — RISMedia


Mortgage rates are unpredictable, but a rate lock can keep rates low and give homebuyers peace of mind.

What is a Mortgage Rate Lock?
Interest rates go up and down, which means a borrower’s rate may be higher at closing than it was when first applied. A mortgage interest rate freeze helps combat this.

A mortgage rate lock is an agreement between a borrower and their lender that allows the borrower to lock in a rate. Borrowers can monitor rates, lock in one they can comfortably afford when ready. This ensures that they won’t end up with a higher rate at closing.

How long does a rate lock last?
A rate lock is usually 30 to 60 days. Once expired, the borrower can accept the current rate or extend their rate lock period. Borrowers can also ask their lender for an extension. If you anticipate delays in the buying process, let your buyer know about a possible extension of the rate lock, as some lenders charge a fee for extending the agreement.

To Help Buyers Feel Safe, at Rocket Mortgage® RateShield offer®. Traditionally, borrowers can’t lock in interest rates before signing a purchase agreement, but RateShield® allows buyers to lock in a rate for 90 days. If rates drop while looking for a home, borrowers can lower their rate once. If the rates increase, the borrower can keep the rate he has already locked in.

How much does rate lock cost?
Lenders typically charge a fee of between 0.25% and 0.5% of the loan amount to lock in a rate. But it is essential that borrowers understand their loan terms; sometimes a rate lock is included.

When to lock in a mortgage rate
If a borrower has received an affordable interest rate, it’s usually wise to lock them in. If your client is aware of watch rates, they may want to lock in on Mondays, as rates tend to fluctuate mid-week.

The pros and cons of a mortgage rate lock

A mortgage rate lock can:

  • Protect borrowers from rising rates
  • Include options that allow borrowers to lock in a lower rate if rates drop
  • Give yourself peace of mind in a busy real estate market
  • Be modified with a refinance later

The inconvenients
A mortgage rate lock can:

  • Block a borrower against falling rates if a floating option is not included
  • Come with initial or extension fees

Rocket Mortgage® has no fees associated with our initial lock rate.

The bottom line
A mortgage rate lock can give buyers the extra confidence to start making offers. Make sure your client understands the benefits available to them, such as rate lock extensions or floating options.

Learn more about RateShield from Rocket Mortgage® on our Rocket Pro Insight Learning Center.

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