What is a Rate Lock on a Mortgage?

What is a Rate Lock on a Mortgage

A rate lock on a mortgage refers to an agreement that is made between a lender and a borrower that allows for the borrower to secure the interest rate (at the current market interest rate) on a mortgage over a time period that is specified. If a borrower does not agree to a rate lock, the lender may require that the borrower pay a lock fee. In other cases, the lender may decide to charge a higher rate of interest in the mindset that the borrower may not lock their mortgage interest rate.

At the time that a borrower secures their rate lock for their mortgage, it is binding for the lender and the borrower. The interest rate will be secured from the time of the offer to the time that the mortgage is closed. The interest rate will remain consistent, even if the market fluctuates, unless there are changes to the mortgage application during the closing of the mortgage. If there are changes to the application, like a change of the borrower’s credit score or income, the mortgage amount may change, which will in turn effect the overall interest rate. Also, if the borrower decides to make changes to the type of mortgage they are applying for or if their home appraisal changes, their interest rate will change.

The interest rates for mortgages can change on a daily and even hourly basis. If a borrower locks their interest rate, they will not experience the changes and fluctuations in the market. Rate locks are generally set for a specific time frame and can last anywhere from 30 days to longer than 60 days. If a borrower decides to lock their interest rate, they should make sure to read over their agreement with their lender to make sure they have enough time to close their mortgage before their rate lock agreement expires.

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Listing courtesy of Steve Wigand from ERA FIRST ADVANTAGE REALTY, INC.

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Here is the cutest bungalow offering up to 4 bedrooms, a remodeled bathroom with attached dressing area/utility room, a refurbished kitchen, 3 porches, a heated detached garage all on 4 city lots in the quaint town of Birdseye. This home has great curb appeal with a newer metal roof and siding. The 3 porches offer secluded places to enjoy the quiet time, swinging or viewing the beautiful landscape. The kitchen is full of charm with the original painted cabinets redone with an updated twist and new flooring. The kitchen leads to the utility/laundry/bath area and also to the living room extending to a master bedroom and enclosed porch. The upstairs reminds you of 3 lofted bedrooms full of character. You will love the large yard and detached garage that complete this property. Start enjoying what this home has to offer...close to city park, library, ice cream, convenience amenities, and Patoka Lake! $116,000 Active

405 Antonia Street Birdseye, Indiana

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Listing courtesy of Tama Stemle from RE/MAX Local.