Mortgage Rate Lock: How to Protect Your Interest Rate

Once you’ve shopped around and found the best interest rate for your home loan, there’s one more important step to take: getting a mortgage rate lock. Your rate isn’t guaranteed unless you request a rate lock in writing, and the wrong decision could leave you with a higher monthly payment when you buy a home — or less monthly savings if you’re refinancing.

What is a mortgage rate lock?

A mortgage rate lock is a commitment from a lender to guarantee a mortgage rate for a set period of time. As long as there are no changes to your loan application and you close before your lock-in period expires, your interest rate should be the same at closing as it was on the loan estimate. Most rate locks are available for 30, 45 or 60 days, although some lenders may offer longer lock periods.

The mortgage rate lock is based on the following criteria:

• Your down payment
• Your closing costs
• Your home’s value
• Your credit score
• Your loan program

If your lender discovers any changes to your initial application before your closing, your interest rate could change. Locking in a mortgage rate is also tied to your loan program (e.g., conventional, FHA or VA), which means your rate could change if you switch programs.

Why should I lock my mortgage rate?

You should lock your rate so it doesn’t change before your closing. Mortgage rates change daily — and in volatile markets, even hourly. Your rate isn’t guaranteed unless you lock it in, and a higher rate means a higher monthly payment and thousands of dollars of extra interest charges over the life of a loan.

When can you get a mortgage rate lock?

Most lenders allow you to lock once they’ve received your loan application, pulled your credit report and issued a loan estimate. If you’re buying a home, lenders typically can’t lock your loan rate until you have an accepted purchase contract. However, some lenders offer options that allow you to lock before you’ve found a home, and then apply the lock to a home once you’re under contract.

When should you lock in a mortgage?

If you’ve compared rates with at least three to five lenders and reviewed all the closing costs on their loan estimates, it’s best to get a mortgage rate lock in as soon as possible. In addition, there are different factors to consider when buying versus refinancing a home.

The table below breaks down scenarios where locking makes the most sense if you’re buying or refinancing:

Purchase mortgage rate lock tips

When you buy a home, your purchase contract sets the timeline for locking your loan. Try to give yourself an extra cushion in case repairs are needed on the home. Lenders often offer lock periods in 15-day increments — and an extra two weeks may give you wiggle room if any last-minute delays pop up with your closing date.

Refinance mortgage rate lock tips

Before you lock in a refinance rate, be sure you’ve determined how long it will take to recoup your costs. This is called your break-even point, and it’s calculated by dividing your total closing costs by your monthly savings. For example, if you spend $5,000 on closing costs to save $200 per month, it will take 25 months, or just over two years, to recoup your costs ($5,000 / $200 = 25). If you won’t live in your home that long, a rate lock or refinance doesn’t make sense.

There are a number of rate-and-term refinance programs that don’t require an appraisal. The FHA streamline and VA IRRRL programs don’t require an appraisal at all, and conventional lenders may offer an appraisal waiver if you have enough home equity. Renovation and cash-out refinance loans require a full appraisal, however, which could make your closing date unpredictable, or even result in a change to your rate lock if the value comes in lower than you expected. It’s best to choose a longer rate lock period for these mortgage types.

How a mortgage rate lock works

Locking an interest rate is part of the regular mortgage process. There are three common steps to getting a mortgage rate lock:

1. Compare loan estimates. Within three business days of receiving a loan application, lenders must provide you with a loan estimate detailing interest rates and fees.
2. Discuss how long you should lock. Your loan officer will give you a lock recommendation based on your closing date or the type of refinance you’re applying for.
3. Keep track of your lock expiration date. Once your rate is locked, you’ll receive an updated loan estimate with an expiration date. The cost of extending a lock in a fluctuating financial market could be very expensive and may vary from lender to lender.

How to lock in your mortgage rate

Your loan officer will lock in your interest rate based on the lender’s lock policy. In most cases, your rate can be locked once your application is complete and your credit score has been verified. If you’re trying to buy a home, you may have to wait until you have an accepted contract to lock in your rate.

Other lenders may require a conditional loan approval before locking or, in the case of a renovation loan, receipt of the appraised value that shows how much your home will be worth after the repairs are completed.

What is the cost to lock in a mortgage rate?

You won’t pay a rate lock fee in most cases if it’s 60 days or less, though some lenders may charge a fee for longer-term locks that can be applied toward your costs. Some construction lenders offer long-term locks to protect your interest rate while your home is being built.

You may be on the hook for a rate lock extension fee if your lender has to extend or relock your rate because you don’t close by your lock expiration date. Be sure to discuss your rate lock period ahead of time to avoid any rate lock extension or relock costs.

What is a float-down mortgage rate lock?

A mortgage rate float down is a special program some lenders have in place to allow you to take advantage of falling interest rates, even if your rate is already locked. You’ll typically need to meet the following criteria in order to be eligible:

• Your loan must be conditionally approved. Lender float-down policies usually only apply to loans that have received an approval based on a review of your credit, income and assets.
• Your rate must drop by a certain amount. In most cases you can’t float down your rate unless it drops a quarter- to half-percentage point.
• You’ll need to pay a fee. Because the lender has to renegotiate your lock with the investor you already committed to, you’re usually charged a fee of up to 0.50% of your loan amount.

Why your mortgage rate lock might change

Any discrepancies between your loan application and the information vetted by your lender can result in a change to your locked rate. Here are the most commons reasons your locked rate could change:

You change the loan program. Interest rates are tied to the loan type you choose. For example, if you apply for an FHA loan and switch to a conventional loan, the rate would have to be relocked based on conventional interest rates.

Your appraisal comes in low or high. If you’re buying or refinancing a home, a lower-than-expected appraised value could trigger a change to your interest rate. A higher appraisal may help you snag a better rate on a refinance, but it won’t help on a purchase loan, which has a rate that’s based on the lesser of the purchase price or appraised value.

Your credit score changes. If your lender has to pull a new credit report before you close, a late payment or higher credit card balances could push your locked-in rate higher.

Frequently asked questions

How long can you lock in a rate?

The standard lock timeline is between 30 and 60 days with most lenders. However, locks as long as one year may be available for construction loans if you’re building a home.

Can you lock any type of loan?

Yes, but some lenders may set their own rules about when you can lock your rate. If you’re taking out a jumbo loan, renovation loan or a nonqualified mortgage, ask your lender when you can get a mortgage rate lock.

What happens if my rate lock expires?

You’ll have to pay a relock fee or a lock extension fee. Typically the longer you need to extend, the more it will cost. If you have to relock, your new rate will be based on current rates or your original lock, whichever is higher.

What if rates drop after I lock?

Check with your lender about a float-down rate lock option if you notice rates are falling after you lock.

Can you lock in a mortgage rate before you have a purchase contract?

In most cases, no. However, some lenders offer programs that allow you to lock for up to 90 days while you’re house hunting.

Can I lock a rate with multiple lenders?

You can, but it’s not a good idea. For example, you could lock in your rate with two different mortgage brokers who do business with the same lender, and get a phone call that you’ll have to cancel one or the other. Plus each lender is required to pull their own credit report, which could ding your credit scores.

How often do mortgage rates change?

Interest rates are like stocks: They can fluctuate based on market conditions that change daily, and sometimes even hourly.

Does locking a rate commit you to a lender?

Yes. If you decide you don’t want to proceed with that lender, you’ll need to restart the mortgage process.