Why locking your mortgage rate won’t box you in

Published August 14, 2020
Lucy Randall (NMLS ID: 1571868)
by Lucy Randall (NMLS ID: 1571868)

 Row of Multi-Colored Attached Homes with Text That Reads: Lock it Down But Stay Flexible

If you’re applying for a mortgage or refinancing a current loan, one of the steps you’ll take is “locking” your interest rate. While interest rates can go up or down during the course of the underwriting process, locking your rate guarantees a specific interest rate for your loan. Though that terminology may seem final, the truth is you may still have some flexibility even after you’ve locked in your rate. Keep reading to learn more about how rate locks work.

What locking your mortgage rate means

You can lock in an interest rate when you and your lender feel market conditions are favorable enough to provide the best available rate for your mortgage.

Note that the final interest rate you end up locking may be different from the rate that was used when you received your preapproval letter. However, after you lock, your lender will honor that rate, even if market fluctuations cause rates to increase.

Keep in mind that rate locks don’t go on indefinitely. They typically last between 30-60 days, which is long enough to get most loans through underwriting and to the closing table. When you do decide to lock in your rate, confirm that the lock period extends beyond your closing date. If your rate lock expires before this time, it can be extended—just check with your lender to find out if doing so will result in any additional fees.

Why you should lock your mortgage rate

When you lock in your interest rate, you’re taking a crucial step toward figuring out for sure how much your mortgage payment will be each month. Until then, your interest rate, and therefore payments, are subject to daily market fluctuations based on how the mortgage market is doing. Learn more about how rates work here.

If market volatility results in interest rates going up then the total cost of your loan and your monthly payments may end up higher than the original quote by your lender.

On the flip side, if market conditions improve significantly and rates go down, your locked rate won’t go down. But there may be a silver lining: In some cases and in times of extreme market volatility, you may be able to arrange a one-time “float down” to secure a lower rate if it becomes available. This feature may come with additional costs, so find out how rate lock and float down options work with your lender.

When can you lock your mortgage rate?

You can lock your interest rate any time (after pre-approval) throughout the loan process once you’ve been pre-approved, but ideally, this will happen before you receive full loan approval and are cleared for closing. Your lender will likely nudge you to do so, but don’t be afraid to check in and request a rate lock, either.

Remember, locking in a rate simply protects against any future market volatility, and rates could go up or down from the moment you lock.

In the end, choosing when to lock your rate is about committing to an interest rate where you feel confident in your ability to make your monthly mortgage payments.

Gif: Green Lock Entering From Left

Once you lock your rate, you’ll still have flexibility.

The idea of locking may seem limiting, but you’re not actually handcuffed to one final option. In fact, you’ll still be able to:

  • Select a different type of loan: When you lock your mortgage rate, you’re essentially requesting that we hold all of the rates available to you across all of our products for that day. So for example, if you later decide to change from a fixed-rate to an adjustable-rate mortgage, we’ll honor the original day’s rates for whichever loan type you choose.
  • Change your mind on taking credits versus paying points: When you lock your rate, you’re also locking all of the points and credit options associated with that rate. For instance, if you decide later on that you want to pay more points up-front for a lower rate, we’ll do that math based on the original rate you locked.
  • Make changes to your application: Even after you lock your rate, you can still make changes to your loan amount or add a co-borrower (keep in mind that actions like these may change your rate options, but they’ll still be based on the day you locked your rate).

You can lock your rate when it works for you and still adjust your options to meet your goals. If you like what you see, you can lock your rate instantly online.

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