Interest Rate Lock Process – What Does it Mean?

When you and your lender agree to lock in your rates, it means you can be sure that the negotiated interest rate and number of points will not change during the negotiated time frame. Also called a rate commitment, lock, or a lock rate, all of these terms mean the same thing. A rate lock typically remains in effect while your mortgage application is being processed but can be extended until after it’s approved, depending on it is negotiated.

Ensuring you receive the negotiated interest rate even if it increases after the loan closing date is the primary reason home buyers pay any fees associated with this type of protection. Of course, interest rates could go lower than the locked in rate, and if this happens, you likely would not be able to take advantage of the lower rates. Because you locked in a rate, you’d be committed to paying the higher rate. Should this happen though, it’s always worth the effort to ask the lender to renegotiate the lower rate. However, understand that doing so would be entirely at the lender’s discretion.

A rate lock is a gamble, that’s for sure. And only you can decide whether it makes sense in your situation. If you’re looking for a home, you can benefit by keeping a close eye on current interest rate trends. Knowing the direction they’re moving may help you get a better idea about the direction they’re likely to head during the loan application process. Locking in rates will make the process smoother because it’s one less thing you have to worry about. But again, the decision to lock in or not to lock in is entirely up to you.