What is a "rate lock period"?
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Freezing the Rate
When you are offered a "rate lock" from your lender, it means that you are guaranteed to get a set interest rate over a certain number of days for the application process. This protects you from working through your whole application process and finding out at the end that the interest rate has risen higher.
Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer ones generally costing more. The lending institution will agree to lock in an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.
More Ways to Get a Great Interest Rate
In addition to choosing the shorter lock period, there are other ways you may be able to score the lowest rate. A bigger down payment will get you a reduced interest rate, since you'll have a good deal of equity at the start. You could opt to pay points to lower your rate for the term of the loan, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to reduce the rate over the life of the loan. You'll pay more up front, but you'll come out ahead in the long run.
At Mortgages Plus, we answer questions about this process every day. Call us at (720) 633-5799.