Learn all about rate locks and mortgages during National Homeownership Month

A mortgage rate lock is an agreement between a borrower and a lender that guarantees the interest rate on a mortgage won’t change between the offer and closing, as long as you close within a specified time frame and there are no changes to your application. The time frame is typically 30 to 60 days, but it can sometimes be longer. If your rate is not locked, it may change at any time.

Should You Lock in Your Mortgage Rate?

Locking in your rate can be a wise decision, especially in a volatile market where rates are expected to rise. You should consider these factors when deciding to lock in:

1. Protection against rate increases

   If you lock in your rate, you are protected from potential increases in interest rates if they happen during the lock period. This can give you peace of mind that your mortgage rate will not increase unexpectedly before closing.

2. Potential risks

   If rates decrease after you lock in, you won’t benefit from the lower rates unless you pay to extend or renegotiate the lock. If your closing ends up being delayed, extending a rate lock could become costly.

How Long Can You Lock in a Mortgage Rate?

As we mentioned, the most typical time frame is between 30 and 60 days. Some lenders have been known to offer 120 days. It’s important to make sure your rate lock period is long enough to cover the time until you close on your home loan. If you are concerned that your rate lock period might be too short, talk to your lender about your concerns and ask about the pros and cons of switching to a longer rate-lock period. Cadence Bank offers an extended rate lock program for certain types of loans. Be sure to ask your Cadence lender if it’s a good fit for you.

How Often Do Mortgage Rates Change?

Mortgage rates can change daily or even multiple times within a day. This frequent fluctuation can be influenced by economic conditions, inflation, moves made by the Federal Reserve or other factors. Many homebuyers like to lock in when they get a favorable rate to ensure they don’t lose it due to increases in rates.

Common Mortgage Rate Lock Questions

1. What happens if my closing is delayed and the rate lock expires?

   If your closing is delayed beyond the rate lock period, you may need to pay a fee to extend the lock. It’s better to discuss this possibility with your lender up front.

2. Can my rate change if my application details change?

   Yes, your rate can still change if there are significant changes in your application, such as your loan amount, credit score or verified income.

3. What if interest rates go down after I lock my rate?

   What if interest rates go down after I lock my rate? If rates decrease after you lock in, you won’t benefit from the lower rates unless you renegotiate. Some lenders, such as Cadence Bank, offer a “float-down” option, allowing you to take advantage of lower rates under certain conditions. Be sure to ask your Cadence lender about float-down possibilities you may qualify for.

4. Is a shorter or longer rate lock available? Does it cost more?

   Rate lock policies vary by lender. The cost may differ based on the duration of the lock. It’s important to ask your lender about the costs associated with each different period or offering and weigh your options to make the best cost decision for you.

Locking in your mortgage rate can be a good strategy to give you stability and peace of mind. It’s important to enter into a rate lock agreement understanding the potential benefits and drawbacks. Understanding the terms and conditions and their effect on your overall home loan cost can help you make better financial decisions.

Have more questions about mortgages, rates and the homebuying process? Cadence Bank can help. We are the Home Loan Experts. Find a lender in your area today and get step-by-step guidance through the home buying process.

Sources:
https://www.consumerfinance.gov/ask-cfpb/whats-a-lock-in-or-a-rate-lock-en-143/
https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-the-impact-of-changing-mortgage-interest-rates/
https://finance.yahoo.com/personal-finance/mortgages/article/mortgage-rate-lock-154037396.html