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- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Mortgage Rate Lock
People who have refinanced or got a mortgage in the past would have heard many times from the lender or the loan officer about locking the interest rate.
The index for the interest, changes every day, sometimes more than once a day. That is why the mortgage rate lock is essential. In today’s post, we will understand what is mortgage rate lock is and how does it work.
We are going to review four considerations that you should keep in mind when choosing whether the mortgage rate lock is right for you or not.
What Is Mortgage Rate Lock?
When you are either refinancing or getting a new mortgage, there is an option where you can lock your mortgage rate with the lender.
When you lock your rate, your lender gives you a lock time period, which is usually for thirty days. This simply means you are guaranteed no worse than the rate offered by the lender for the next thirty days.
In this way, even if the interest rate gets worse within the thirty days, the borrower will still get the best interest rate, which was initially offered.
If the loan is not getting closed within the lock period, you can also request a mortgage rate lock extension from the lender.
What if the mortgage rates get better after you have locked your rate? There is a very small possibility that the market rates get better than the rate that you have locked.
How Can A Borrower Lock In A Mortgage Rate?
Locking an interest rate means that you select a specific interest rate at a particular cost for a specific period.
The longer the rate lock period you want, the more you will pay based on the market price and the day that you lock.
Lock period tends to be offered in fifteen days increments. The difference in the cost for different lock period depends on the lender and the market conditions.
The most significant thing to remember when locking a mortgage rate is to understand the difference in cost with regards to the lock period.
This might help you to save a substantial amount of money in your loan process.
What Is A Floating Interest Rate?
A floating interest rate can make a deal look a lot more attractive, especially when you are talking about buying points. Eventually, if the rate goes up and you are locked in before that, you get the benefit.
And if the interest rates go down, a smart lender may also drop the interest rate. Because, if they don’t, they might lose the business and money that they are going to make on that particular loan.
If the lender has you approved and ready to go and offers to meet you halfway, chances are you are going to close your mortgage with the same lender.
So, in this case, the lender will float down your rate to the current rate, but at the same cost as the original rate lock.
Does The Competition Help The Consumer?
Perhaps you might be hearing about rate locks and floating interest rates for the first time. It is nothing new, it has been around for a very long time.
You just don’t hear lenders advertising it. We all know that if the values of the homes are down and lenders have to get more creative and offer you different financing options, especially when mortgage interest rates climb.
If the mortgage interest rates are down, you usually don’t hear about ‘mortgage rate lock’.
It is essential to know why you are hearing about this advertising now so that you know what to do with it and decipher the advertising and make sure that it is something that you want to do.
Since the mortgage industry is a very competitive market, you will hear more and more lenders advertising about rate locks. So it is very significant to know about it before you make your decision.
Conclusion
It could be confusing to understand to your full potential how mortgage rate lock works, that is why it is essential to speak to your trusted loan officer and ensure the best time for you to lock your rates and make an informed decision.
Educating yourself about what is mortgage rate lock, is the best option for you to make that smart decision.
