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Understanding Mortgage Rate Locks: Can Mortgage Rates Change After I've Locked In?


Introduction

Securing a mortgage is a significant step towards homeownership, and one of the key decisions you'll make is whether to lock in a mortgage rate. Once you've locked in a rate, it's natural to wonder whether mortgage rates can change during the locked-in period. In this blog post, we'll delve into the intricacies of mortgage rate locks and explore whether rates can indeed change after you've locked in.

The Basics of Mortgage Rate Locks
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A mortgage rate lock is an agreement between you and your lender that guarantees a specific interest rate for a predetermined period. This rate lock period typically ranges from 15 to 60 days, during which time your lender ensures that the interest rate remains constant, protecting you from potential rate fluctuations.

Can Mortgage Rates Change After Locking In?

In general, once you've locked in a mortgage rate, that rate is fixed and won't change during the specified lock period. This stability is one of the primary benefits of rate locks, providing you with financial predictability as you move forward with your home purchase. However, there are a few important considerations:

Market Fluctuations: While your locked-in rate remains constant, market interest rates can still change. If overall market rates rise or fall during your lock period, your locked-in rate remains insulated from these changes.

Rate Lock Expiry: If your mortgage doesn't close within the agreed-upon lock period, your locked-in rate might expire. If this happens, you could be subject to the prevailing interest rates at the time of re-locking.

Rate Lock Extensions: If your mortgage processing takes longer than expected and your rate lock is about to expire, you might have the option to extend the lock. However, extensions often come with additional fees, and the extended rate could be different from the original rate.

Exceptions and Flexibility

While mortgage rate locks provide stability, some exceptions and options exist:

Rate Float Down: Some lenders offer a rate float down option, which allows you to secure a lower rate if market rates drop significantly during your lock period. This option may have conditions, fees, and specific requirements.

Lender Discretion: In some cases, lenders might offer flexibility if market conditions change dramatically. They could choose to lower your locked-in rate as a goodwill gesture, but this is at their discretion.

Managing Rate Locks

To ensure you make the most of your rate lock, follow these steps:

Know the Lock Period: Understand the duration of your rate lock and the implications of not closing within that timeframe.

Monitor Market Trends: Keep an eye on market interest rate trends, especially if your lock period is longer. This will help you make informed decisions about your rate lock strategy.

Stay in Communication: Maintain open communication with your lender. If you anticipate delays in closing or notice significant rate changes, discuss your options with your lender.

Conclusion

Locking in a mortgage rate provides a valuable level of certainty in an otherwise dynamic market. While rates generally remain stable once locked in, market changes, lock period expirations, and specific lender options can influence your rate. Understanding the terms of your rate lock, staying informed about market trends, and engaging with your lender when needed will help you navigate the rate lock process successfully on your path to homeownership.
 

How do I know if I'm getting the best rate?

 

Frequently asked questions (FAQs) related to bank mortgage rates


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