Should you lock in a mortgage rate?

Rising Interest Rates – Should I Lock in

the Mortgage Rate?

One of the most important financial considerations of buying a new home is

the interest rate paid on the mortgage. Over time, a higher interest rate can

add thousands of dollars to the true cost of buying the home. When interest

rates are low or steady buyers have greater confidence that they will get a

favorable rate when they go to secure the loan, but in our current

environment of rising interest rates, many lenders are suggesting a rate

lock at the time of pre-approval.

What is a Mortgage Rate Lock?

A rate lock freezes the interest rate on a mortgage for a period of time

before the close of the loan. Typically lasting for 30-60 days, the lender

guarantees the rate will not change during this period for a fee that is paid

when you agree to the loan terms.

A mortgage lock protects the borrower from rising interest rates while the

loan is processed and approved.

When should you lock in a Mortgage Rate?

Lenders will offer to lock in the rate at the time of loan approval. With

escrow periods of 30-60 days, the lock assures the buyer that their rate will

not increase during the time it takes to complete the loan process.

In a period of rising interest rates, as we see today, locking the rate may be

a smart idea. The borrower will pay a higher fee for the lock, as the lender

is also taking a risk, but it could be worth thousands of saved dollars over

the life of the loan. Even a small increase in the interest rate can have a

huge financial impact.