There are few things more exciting than your new home journey, and we’re here to help ensure your experience is free from any unexpected surprises – and costs. Mortgage interest rates are unpredictable and can fluctuate many times between when you file a loan application and when you actually close on your home. This could potentially save you – or cost you – hundreds to thousands of dollars over time. If you want to keep some peace of mind and preserve the rate in your mortgage loan offer, get a mortgage interest rate lock.
What exactly is a mortgage interest rate lock?
A mortgage interest rate lock is a guarantee that a mortgage lender will honor a specified interest rate at a specific cost for a set time period.
What are the benefits of locking your mortgage rate?
The biggest benefit of locking your mortgage rate is that you’re protected from market fluctuations – your rate won’t increase during the construction process. This gives you peace of mind and security knowing exactly what your monthly payments will be helping you stay on budget and plan for the future. Not locking in a rate could mean having to come up with more money for your down payment. Why? If your monthly payment increases because of higher interest rates, a lender may require more money upfront to meet their lending requirements.
Are there any risks in locking my mortgage rate?
Some lenders won’t let borrowers revisit their interest rate if the market changes. If interest rates drop but you’ve locked a higher rate, these lenders hold you to the higher interest rate. Fortunately, with McLean Mortgage Corporation, if rates improve after you’ve already completed a rate lock, you can relock the lower rate without any cost or penalty.
How long can I lock my mortgage rate?
Typical lenders will lock in rates for 30 to 60 days. With McLean Mortgage Corporation, you can choose coverage options of 30 days, 60 days, 120 days, or 180 days to secure your interest rate while your new home is under construction. The rate will stay consistent, regardless of market changes – as long as there are no changes to the application for the loan (changes in income, credit score, loan amount, etc.).
When do I need to lock my rate?
It depends on the specific lender, but some will lock in a rate as soon as you’re pre-approved with just an address of a prospective home. Others might wait until a later date. McLean Mortgage Corporation offers long-term locks giving you up to 180 days of interest rate protection so you can choose how far in advance you want to lock in your interest rate.
How much does a rate lock cost?
Rate locks aren’t free – but that doesn’t mean you’ll see a separate line item charge for them. Most lenders include the cost of the rate lock into the rate you’re offered so you’re not paying additional money out of pocket. Ask your specific lender about the rate lock cost, and if they don’t offer long-term locks, what additional fees may exist for extending the lock.
What if rates improve and I’m locked at a higher percentage?
Some lenders will offer a rate lock with a “float-down” provision. This means that if rates improve within a specific period, you get the lower rate – but at an additional cost. McLean Mortgage Corporation, however, will let you relock at a lower rate without any cost or penalty to you.
Carol O’Connell at McLean Mortgage sums it up best, “The beauty of the long-term locks is that it provides buyers with many protections. It protects the borrowers from deteriorating interest rate market conditions as well as protecting their household budget plans. It also protects their mortgage loan approvals. If the market improves, however, the borrower is able to relock at a lower rate! So no risk and all rewards.”
We’re here to help you every step of the way during your homebuying journey. Let us help you find your new home and let our mortgage partner, McLean Mortgage Corporation, help you with all your mortgage questions and needs.