Bold tag in the Interest Rate Lock Agreement

Aug 6th, 2022
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The benefit of a mortgage rate lock is that it protects you from market fluctuations in interest rates. For example, if your lender locks in your rate at 6.68 percent for 45 days and rates jump up toward 7 percent within that period, youll still get your loan at the lesser rate.
A lock-in or rate lock on a mortgage loan means that your interest rate wont change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application. Mortgage interest rates can change daily, sometimes hourly.
Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates wont affect you. The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict even for the experts.
If your rate lock expires, you must relock it before closing. When relocking, the lender gives you the current market rate or the rate you locked initially, whichever is higher. For example, your initial rate of 6% expired, and rates have since increased to 7%, so your new rate after relocking is 7%.
When you lock your interest rate, youre protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate. This is called repricing your loan.
If you think rates are likely to stay the same or increase, you might be better off locking. But again, no one ever really knows for certain what the rates will do, so you must be willing to accept the risk if you choose to float. If uncertainty keeps you up at night, locking is definitely the better option.
The charge for a rate lock could range from 0.25% to 0.5% of the amount of your mortgage. For example, on a mortgage loan of $450,000, a 0.25% rate lock deposit would be $1,125.
Most lenders measure this cost as a percentage of your loan amount (0.25% for example). What happens if you lock in a mortgage rate and rates go down? If interest rates go down after your rate lock, you are still committed to your initial, agreed-upon rate, unless your loan includes a float-down provision.

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