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Get a Rate Lock on Your Mortgage

Posted by  on Apr 01, 2010
 

Make sure you get the lowest mortgage rates possible when shopping to refinance a mortgage. Getting a home loan lock-in can help you close on your mortgage without being blindsided by higher costs if mortgage interest rates rise.

Mortgage Interest Rate Quotes

When shopping around before refinancing, ask mortgage lenders to give you a rate lock, which is a guaranteed rate for a certain period of time. Locking the lowest mortgage rates can cost you one or more points. One point is equal to 1% of the total amount of the loan.

You may be charged a fee for getting a rate lock. The fee may be charged when you apply for a mortgage or at the settlement. Some mortgage lenders charge a flat fee while others charge a percentage of the loan amount.

Mortgage Rates Can Change

If you are working with a tight budget for purchasing a home, increasing mortgage rates could make it tough to afford the property you've chosen. However, getting a rate lock may mean you that you miss out on paying less interest if mortgage rates decline. Some mortgage lenders may be willing to lower your interest rate if that occurs so ask for that option before committing to a mortgage. This is called a float down and there are usually fees involved.

Get it in Writing

Avoid verbal lock-in agreements. Get the deal in writing from mortgage lenders to avoid any problems later. If you can, get a copy of a mortgage lender's lock-in form before applying for a refinance to review it.

Keep in mind that the length of a lock-in depends on what you want to pay. Some rate locks are good for up to 120 days, while others may only last 30 days. Generally, you pay a higher fee for a longer rate lock. If the rate lock expires, you may be offered a loan at whatever the current mortgage rates are.

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