When is the Best Time to Lock-in an Interest Rate?

When it comes to mortgage loans and interest rates, it’s never a good idea to gamble. It’s typically advisable that you lock in an interest rate shortly after you have a ratified home contract or a settlement date. This is just one step of the streamlined system that Apex Home Loans has put in place to ensure the best possible loan experience for each customer that we serve.

While you can prolong locking in an interest rate until just before closing, it’s usually not a good strategy due to these factors:

• Fluctuating interest rates
• Accumulating points or fees
• The length of the lock

A loan lock is a contractual agreement between the homebuyer and lender: it is a commitment by both parties to close at the agreed upon term. The lock removes the risk of market volatility throughout the duration of the purchase. As long as the loan is approved and funded before the end of the lock period, the customer will receive the interest rate quoted.

When a lender permits an extended lock-in period, the homebuyer will likely face a higher interest rate or additional fees that could be quoted as points. In other words, the customer pays for the lender to take on the extended risk of being exposed to potential changes in the market.

For example, let’s say a 30-day rate-lock commitment costs the customer one-half point, while a 60-day rate-lock commitment costs one full point. If the customer in this scenario needed the extended lock-period, but did not want to pay points, then an alternative would be to accept a slightly higher interest rate. In this case, a 60-day lock would typically have a higher interest rate than a 30-day lock.

So when should you lock in? That should be determined based on your specific financial situation and needs in consultation with your Mortgage Banker. Other scenarios can get complicated, and that’s why it’s important that you consult with an experienced Mortgage Banker to discuss any questions and to learn more about the loan programs available.

Contact one of our certified mortgage planning specialists to discuss when to auto-lock your loan.

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Please be aware: by refinancing your existing mortgage, your total finance charges may be higher over the life of the loan.