What is a Mortgage Rate Lock?

A mortgage rate lock is a mortgage lender’s commitment to honor a quoted mortgage rate through closing for a home buyer.

A Longer Definition: Mortgage Rate Lock

A mortgage rate lock is a price agreement between a mortgage lender and a home buyer with three parts: a mortgage rate, a cost, and a time frame.

1. The mortgage rate is the interest rate for the buyer’s mortgage.
2. The cost is the number of discount points the buyer will pay at closing.
3. The time frame is how many days the agreement is valid.

When a home buyer asks for a rate lock, it signals their commitment to the mortgage lender and their approval to proceed with mortgage underwriting. The rate lock guarantees the mortgage terms for a specific number of days, unless there are material changes in the application related to credit score, employment, or address.

Until a mortgage is rate-locked, its interest rate is subject to change. Once locked, the rate lock is honored, regardless of market fluctuations or current mortgage rates.

Home buyers can request mortgage rate locks in 15-day increments.

The typical quoted rates, like those shown on the Homebuyer.com mortgage rates page, assume 30-day mortgage rate locks. Longer locks may increase rates.

Here is how the number of days in a mortgage rate lock can affect cost. This chart is based on sample mortgage pricing. Today’s mortgage rates may be different from the chart below.

The Cost of Mortgage Rate Lock Lengths

Rate Lock Length	Potential Cost Implications
15-day	May include a credit of roughly 5 basis points
30-day	The general, standard mortgage rate
45-day	Could include a cost of roughly 7 basis points
60-day	Could include a cost of roughly 13 basis points
90-day	May involve a higher cost, potentially 25 basis points above the standard rate plus other fees

Home buyers may also have the option to select mortgage rate locks longer than 90 days, though costs could vary based on lender policies.

When deciding on a rate lock length, it’s important to choose a time frame that covers the expected period until your closing date. While rate locks can sometimes be extended for a fee, the cost of extending may vary and could become significant depending on the circumstances.

Mortgage Rate Lock: A Real World Example

First-Time Home Buyer Stories - Mortgage Rate Lock

Imagine a first-time home buyer who gets their offer for a home accepted. Their buyer’s agent smartly negotiates for a closing date in 30 days, allowing the buyer to secure a 30-day mortgage rate lock from the lender.

In the following weeks, the market for mortgage-backed securities deteriorates, causing a sudden and sharp increase in U.S. mortgage rates. Since the buyer’s rate was locked, they are shielded from the increase.

At closing, the buyer feels fortunate for securing a rate below current market rates and for choosing a 30-day rate lock, which was less expensive than a 45-day lock. Their timing and strategy worked out well.

Common Questions About Mortgage Rate Lock

What happens if mortgage rates drop after I lock in my rate?

If interest rates decrease after locking in a rate, home buyers generally cannot take advantage of lower rates unless their rate lock agreement includes a “float-down” option, which usually comes with additional costs.

Can I extend a mortgage rate lock if my home purchase is delayed?

Yes, many lenders offer the option to extend a rate lock, but there may be an additional fee. It’s important to discuss extension policies with the lender in advance.

Is there a fee for locking in a mortgage rate?

Some lenders charge a fee for a rate lock, while others offer it at no cost. The fee, if charged, usually depends on the length of the lock period.

How long can I lock in a mortgage rate?

The typical lock period ranges up to 60 days, but longer periods may be available. Keep in mind that longer rate locks can be more expensive.

Does a rate lock guarantee my mortgage application will be approved?

No, a rate lock only secures the interest rate. The approval of the mortgage application depends on factors such as credit score, income verification, and the property appraisal.

What are the risks of not locking my mortgage rate?

Without a mortgage rate lock, home buyers are exposed to potential interest rate increases before closing. Higher rates can result in higher monthly payments and could affect mortgage approval.

How does a lender determine the locked-in rate?

The locked-in rate is typically based on current market rates at the time of the lock, along with factors in the mortgage application such as credit score, loan amount, and down payment.

Can a mortgage rate lock be canceled?

Yes, a mortgage rate lock can usually be canceled. However, canceling may involve fees, especially if the home buyer switches lenders after locking in a rate. Canceling the rate lock also means the buyer is subject to current market rates, which could be higher.

If I lock in a rate with one lender, can I switch to another lender?

A home buyer can switch lenders after locking in a rate, but the locked-in rate with the initial lender will be lost. Starting with a new lender means being subject to their rates and terms, which could be different from the original agreement.