Always Lock Your Mortgage Rate

A “mortgage rate lock” is essential to ensure you actually receive the interest rate you are quoted by a bank or mortgage broker. Often times you will you be presented with a mortgage rate quote, but it means very little until it’s actually secured, or “locked,” by a bank or lender.

When you lock in a mortgage rate, you are guaranteed that interest rate, assuming your loan actually qualifies under said lender or bank’s guidelines. By locking a loan, you secure a specific interest rate along with certain terms, including the mortgage index and margin the program is tied to, the prepayment penalty if any, and the initial, periodic, and lifetime caps.

Rate Lock Period

When you lock your loan, you must also choose a rate lock period, which can range from 7 days to 90 days or even longer. The most common lock term is anywhere from 15-45 days, which is the average time it takes for a loan to close.

It’s important to pick the appropriate length of time to ensure you get the loan closed before the lock expires, without subjecting yourself to additional fees.

Either way, you will always have the opportunity to extend your rate lock at a relatively small cost if the process gets delayed, which it often will!

When to Lock Your Mortgage

Some borrowers may choose to lock in a mortgage rate at the initial time of the loan application, before the loan is even submitted to the underwriting department. This is known as a “pre-lock,” and ensures the interest rate is set before the loan is even underwritten.

It can be helpful to pre-lock your mortgage rate if the debt-to-income ratio is close to the maximum, so if there are any interest rate fluctuations, the DTI won’t be exceeded. In may also be a smart move if mortgage rates are rock-bottom and there is little expectation for rates to improve further.

Others may float their mortgage rate and lock their mortgage at the last minute, effectively gambling on the hopes of mortgage rates improving later in the loan process. If you feel mortgage rates have more room to fall, this could be the way to go. But as mentioned, it’s a gamble and there’s no guarantee.

What If My Rate Lock Expires Before Closing?

As mentioned, mortgage locks don’t last forever, they come with a set time period.  Assuming you lock your rate in early on, there’s a chance the rate lock period could be exhausted, at which point the lock could expire.

If the rate expires before loan closing, you’ll need to get it re-locked.  This could entail worst-case pricing (assuming mortgage rates have risen) and a relock fee.  For example, if rates went down, you’d be stuck with your old, higher rate and a relock fee to boot.

Ask for a Rate Lock Extension

But typically the lender will keep an eye on the rate lock period and issue a “rate lock extension” before the lock actually expires.  Doing so will ensure you get to keep the rate you originally signed up for.

However, rate lock extensions don’t come for free either.  If it wasn’t the lender’s fault, the cost of the rate lock extension could run you several hundred dollars or more, depending on the associated loan amount.

It is calculated as a percentage of the loan amount.  So you might be charged .125% for a 7-day lock extension, or .25% for a 15-day extension.  These fees will vary from lender to lender and could be more or less.

The higher your loan amount, the higher the cost.  On a $200,000 loan amount, you’d be looking at a cost of $250 or $500 to extend the lock period, respectively.

While that fee sounds like a raw deal, holding onto a rate that is an .125% or more lower could save you a lot of money over the term of the loan.  In other words, it’s better to get the extension than let the lock expire for fear the rate could rise.

If the delay happens to be the lender’s fault, they will generally offer a free rate lock extension for seven days out of good faith.  This should be enough to get the loan closed without any cost to you.  Even if it is your fault, you might be able to get a few free days to ensure the loan closes before the lock expires.

In any case, you can try to negotiate a lock extension in your favor, and ask them to extend it for free if you feel it was out of your hands.  They may work with you to retain your business and avoid you going elsewhere.

Get the Mortgage Lock in Writing

Either way, it’s important to stay on top of your mortgage rate lock, and to make sure you have the rate and terms in writing. Never just assume a mortgage broker or bank has locked your interest rate.

They may say your rate is this or that, or that it’s locked, but in actuality they may be floating your rate in the hopes of getting a better commission or yield spread premium. Or perhaps you’ve been misquoted, and they’re praying the mortgage rate will come down to what they originally quoted you.

I’ve seen that happen a million times. Brokers will go into panic mode if they failed to lock a rate initially, often after quoting their borrower a guaranteed rate. They’ll call the mortgage lender each day to see how mortgage rates have moved, and nervously push on day after day, waiting for the moment rates fall to the level they were originally quoted.

Sometimes brokers will settle for a lower rate with less commission to them, but often they’ll simply tell the borrower the rate is higher for some reason. And the borrower will just have to accept it because they’ve spent so much time working on the loan that they’ll just want to get it done.

Watch Out for Changes

Some loan officers and brokers may even change the original terms they quoted you to get a lower rate. Such as raising the margin, adding a prepayment penalty, or changing indexes, caps, or even loan programs.

All that said, make sure you know exactly what you’re getting when it comes to the interest rate and terms associated with your mortgage rate lock. Any mistakes here will lead to higher monthly mortgage payments for years to come, and a major headache if you fail to jump on a good rate early on.

Sure, you can gamble, but if you’re happy with a certain interest rate, might as well not take chances. And again, always get your lock confirmation in writing from the bank or broker before you proceed with the deal! This cannot be stressed enough!

Compare Today’s Mortgage Rates


36 Comments

  1. Dyanne July 24, 2012 at 8:31 am -

    We locked at 3% in May (15 year fixed). The loan is dragging on and now rates are are a little lower (2.875%) but the lender wants to charge us to extend the lock! What are my options at this point?

  2. Colin Robertson July 24, 2012 at 9:38 am -

    Unfortunately lenders are super backed up at the moment, so even seemingly long rate locks are expiring.

    Sometimes when rates drop you can extend your lock for free, seeing that you’re taking an above-market rate now.

    If that’s a no-go, and you think you can do better elsewhere, you can submit your loan with another lender and take advantage of today’s lower rates.

    The downside to that is playing the waiting game AGAIN, and possibly paying double fees on certain items, all for a measly eighth of a point.

  3. Brorrower August 27, 2012 at 7:52 pm -

    In an atmosphere of declining rates, I refused to pay the lock fee. This approach was unconventional and surprised the originator. By the time they processed my app, the rate had dropped. Also, you can lock, then if the rates drop, you can play hard ball and threaten to walk if they don’t honor the current rate. It’s inconsiderate and will rankle everybody on the lender side, but you can do it. I guess there is a risk that they could tell you on principle to get lost, and refuse your business.

  4. 1st timer April 29, 2013 at 12:46 pm -

    Hello im a first time home buyer and today the rate that was quoted to me was 3.25% which has been the same since i started and points equal about $1,470 right now. Would it be best to lock or continue to float? HELP HELP HELP!!!!

  5. Colin Robertson April 29, 2013 at 3:52 pm -

    Hey 1st timer,

    It depends on a number of things. Are you happy with the rate? Are you worried it will move higher before closing? Are you closing soon? Generally, most people lock within 15 days or so of their closing date, especially if they are happy with the quoted rate. If you don’t lock, you risk your rate moving higher (or possibly lower). The question is do you want to take the risk?

    Learn more: http://www.thetruthaboutmortgage.com/locking-vs-floating-your-mortgage-rate/

  6. Dusty June 26, 2013 at 5:35 pm -

    I am a first time home buyer using a CHFA advantage plan. I was officially under contract last Monday. (16 june) My lender failed to lock me until Yesterday (tuesday 25 of june) my rate is over 1% higher than the rate I was quoted. He said it was company policy to wait to lock until the appraisal is done. I called and checked with his main office and this is not the case. He then said that market volatility is not his fault and he does not have a crystal ball to predict these things. The thing is it took me calling him and emailing him most of the day on Monday, a full week after I was under contract, to get him to lock me in. Now rather than low 4% I am at 5.25%. Do I have any recourse in this matter or am I simply stuck with htis rate?

  7. Colin Robertson June 27, 2013 at 12:05 am -

    Dusty,

    Check your disclosures regarding the rate lock…you’ll probably see something saying the rate is subject to change unless locked. If you feel he dropped the ball, you can always shop around and go with a different lender, but you’ll need to start the process all over again. Alternatively, you can argue for a lower rate than what he locked you at, simply by “negotiating,” using his failure to lock before rates rose as your argument.

  8. Dusty June 27, 2013 at 3:44 pm -

    Ok. Thank you. I just feel like I have no leverage to negotiate anything. I realize 5.25 is still a good rate, but last monday, when I feel we should have locked was far better at 4.375.

    Thank you for your time

    Dusty

  9. 1st time home buyer July 5, 2013 at 3:25 pm -

    Hello all,

    I worked out a mortgage rate at 4.65% on July 1st and my broker wrote in an email that he submitted the rate for locking. After not hearing from him for several days I decided to call him and check on the lock. He said that he actually never submitted the lock and now my rate is 5.2ish%. Is there anything I can do since he initially said he submitted the lock request at 4.65%? Please help!

    Thanks,
    Tom

  10. Andrew Martinez July 6, 2013 at 10:40 pm -

    Dusty,

    If it helps at all rates got much worse on Friday. However, not sure how you are 1.25% higher if your loan was locked on June 25th.

  11. Colin Robertson July 8, 2013 at 12:53 pm -

    Tom

    You need to get the lock confirmation in writing. Not just a verbal that he submitted a lock request. If the loan isn’t actually locked, a request doesn’t mean a whole lot.

  12. Colin Robertson July 14, 2013 at 3:04 pm -

    Unfortunately, this is a very common scenario at the moment. This type of thing happens all the time, you just never hear about it because rates are typically a lot less volatile. Generally, borrowers may find that their rate wasn’t locked, and that rates went up a mere eighth or quarter of a point. Now that rates are going berserk, a lot of borrowers are getting a very rude awakening. Now is probably the most important time in recent history to ensure your rate is actually locked, assuming you want it to be locked! For the record, you should have signed a disclosure regarding the interest rate early on in the process. Check your paperwork and plead with the broker to offer you a lower rate if possible.

  13. Al August 7, 2013 at 7:40 am -

    We received a verbal quote on a locked in rate of 4.875% then the mortgage processor emailed and said he had locked the rate in at 3.875% for 20 years. Now he says that was an error in the email and that the rate is 4.875%. Is he legally bound to the 3.875% he quoted in writing?

  14. Colin Robertson August 7, 2013 at 10:16 am -

    It sounds like they just made a typo if you all agreed on the 4.875% rate.

  15. Diane April 18, 2014 at 9:43 am -

    I am getting a mortgage thru a local bank and told my lender to lock my rate…then the seller dragged their feet and I have been told I have to pay to re-lock my rate because it will be past 30 days (even though rates have gone down a little since). I don’t mind paying the higher rate, but paying to re-lock it seems ridiculous. Why would a bank do this–can’t I just go somewhere else? I don’t want to because the service has been great and I appreciate it, but I am already paying a 3k origination fee for them to write the loan and I don’t want to be an idiot.

  16. Colin Robertson April 18, 2014 at 10:03 am -

    Diane,

    I’m assuming they want you to pay for a rate lock extension, which is perfectly normal. And paying for an extension if it wasn’t the lender’s fault is normal too. However, that doesn’t mean you can’t negotiate or fight the fee, or ask for an exception, especially with rates lower today than when you locked. You could also ask for a float down to the new lower rate for a cost. A fee might sound bad now, but a lower rate for the life of the loan should save you money long-term. You could also shop around and see what other lenders are offering and tell your lender that Bank XYZ is offering a lower rate, just to make your case a little stronger.

  17. Maureen June 18, 2014 at 12:02 pm -

    Hi Colin,
    We are in the middle of refinancing; I have submitted all necessary paperwork which has been submitted to underwriting. Our mortgage guy advised rates are going down; we are refinancing to get cash out and refinance at or <4% (currently our loan is at 4%, our refi would be to apply for jumbo loan and eliminate PMI). We received a call from the appraiser asking to set up an appointment; but our mortgage guy has not locked in our interest rate yet. Does it matter when we get the home appraisal done? Ideally we would need at least another week before having someone come out as as we are doing remodeling in our backyard.

  18. Colin Robertson June 18, 2014 at 3:04 pm -

    Maureen,

    Most loan reps will advise you to get the appraisal sooner rather than later to ensure you get the value you need to actually get the deal done, but obviously not while the house is being remodeled. If you’re concerned about the rate not being locked, you can ask about locking for a longer period of time to cover the time it takes to do the appraisal. Or just listen to your rep and hope rates stay flat or drop.

  19. Maureen June 23, 2014 at 10:34 am -

    Thanks Colin.

  20. LJK August 3, 2014 at 7:02 am -

    Hi Colin,
    My husband and I are building a new home and we locked our rate through Oct 24, 2014 and we will be fine with making that date. On our original application which we agreed upon a 5% 30 yr fixed rate with an opportunity to relock 25 days from closing. The application in the GFE show a 0.5% discount rate equal to $1400.

    Our loan was approved but from this past winter until now, we got married so they asked us to reapply due to the status change. Upon review of the new application, the discount rate is now listed as 1.0% or $2800 and the other fees within the GFE are $917 higher.

    We attached the original app with the 0.5% discount rate and sent an email to the broker and admin staff inquiring about the rate and fees. It is over a weekend and we have not heard back.

    Is it feasible/legal for the terms on a loan to change if we NEVER agreed to any change? What is our recourse? We close in just over a month. Can we change brokers? What would we be liable for besides the application fee?

    We appreciate your feedback.

    L & R

  21. Colin Robertson August 4, 2014 at 9:10 am -

    LJK,

    The loan was approved, but not originally locked correct? Rates change daily so if you wanted that same rate locked, it may cost more on a certain day, as it seemed to in your situation. Ask them why it went from 0.5% to 1% and let me know. And which fees increased.

  22. Mimi September 16, 2014 at 6:32 pm -

    A lender will not allow me to lock in the rate until I have a specific property picked out. Does this make sense? I thought I could lock int he rate for up to 90 days without a known property. Why else would I get pre-approved vs. pre-qualified?

  23. Colin Robertson September 16, 2014 at 9:03 pm -

    Yes that makes sense…lenders don’t want to lock your rate if you don’t even have a purchase contract. There’s a good chance it’ll take a while to find a property in this market. As far as getting pre-approved, it’s a smart thing to do to ensure you can actually get a mortgage. Plenty of people think they’re qualified, only to find out that they’re not. It’s not really about the rate lock at all.

  24. Michelle October 7, 2014 at 11:37 am -

    Hi Colin,

    My husband and I locked in our rate at an appropriate time (after purchase contract and after passing appraisal), but it is now up for expiration. The reason for passing the 30 day date is debatable…the sellers took too long to return some bank documents that needed their signature and also the bank has been slow at processing the paperwork. Regardless, the bank will not admit fault and want to charge us the .25% extension fee for 15 days. However, they can’t even guarantee us that they can close in that 15 days, which would require another .25%.

    My question for you is…we originally locked at a higher than market value rate in order to receive a credit at closing. Rates were at 4.0% at the time of our lock and we took 4.25%. So, if we instead choose to let it expire, what will happen to our closing credit? Will the bank take that away? I am hoping that, for example, if rates are still at 4%, we get the same credit at closing, and if rates are at 4.25% or higher, we would get no credit, etc. Also, if we do let it expire, can we float until closing or do most banks require you to lock again before closing?

    Our loan officer is quite the salesman and he is not giving us a straight answer. We are in purchasing in NY. Thanks for your help.

  25. Colin Robertson October 7, 2014 at 11:07 pm -

    Michelle,

    Theoretically you could let the lock expire and then relock, but you’d be subject to worst-case pricing. And even if pricing is exactly the same, many lenders charge a relock fee. So floating doesn’t really work because they’ll just relock you at worst-case pricing, and tack on a relock fee to boot. So in a sense the lock extension fee is the safer bet to keep your original rate and credit in place. Even though pricing is the same today, or tomorrow, things can change quickly and without warning. However, if rates (and your credit) really are the same as the day you locked and some of the delay is the fault of the lender, they could extend the lock for free (out of good faith) and simply to get the deal done so they make their money. If it takes another several weeks and it’s not their fault, you shouldn’t expect them to cover the cost of extensions. Like anything else in the mortgage world, it always helps to negotiate and plead your case. They shouldn’t want to lose you as a customer, or lose potential referrals from you in the future, so making some concessions now could be a smart move.

  26. Joseph October 8, 2014 at 9:45 am -

    I have my loan tru cashcall, I closed last year at 4.35 – on a jumbo 540K loan – they called me today and offered to reduce my rate by 1/4 of percent (result in $100 reduction a month) at no cost – closing a new loan in Dec I agreed but I am a bit sceptic – why on earth they call and offer this? they said there is no catch – I just need your opinion – what do you think ? should I go for it ? they said they can ever give me 3.99 but I have to pay 1.xx point close to $2000 in closing fees and that wont make sense for me ! if rates go lower I can always re finance

    Please advise

  27. Colin Robertson October 8, 2014 at 4:43 pm -

    Joseph,

    Not sure how many people would refinance just to reduce their payment by a quarter percent, or $100 a month, but to each their own…it’s your decision. Keep in mind that it extends your loan term if you’re actually interested in paying off the loan. And I don’t know what type of loan it is. Paying $2,000 in closing costs means you’d need to hold the loan for a certain number of months before breaking even on the upfront cost, which could hurt if you refinance a third time. Anyway, they’re probably offering it because they make money by selling your loan to investors.

  28. Josephmalkom October 9, 2014 at 2:24 pm -

    I have been only paying ofr 1 year – my current rate is 4.35 My new rate will be at 4.125 – I noticed I can get 3.99 too ! how can I get a better deal ? do they negotiate (they hardballed me yesterday) they are forcing me to sign the documents today

  29. Colin Robertson October 9, 2014 at 4:24 pm -

    If you want to see if there’s a better deal, shop around. Inquire with other lenders about rates with no fees.

  30. ladybug26 October 15, 2014 at 10:35 am -

    I am a first time home buyer and my lender asked me casually if I wanted to lock my rate with no explanation of what this meant. I said okay thinking that I could change this later. I found out, the next day, after asking my dad about it and he stated that today is a better day to lock the rates as it is significantly lower than the 4.25% that I locked yesterday. When speaking to the lender they stated that they cant change anything and also threw in my face that they are helping with 2k in closing costs. I feel as though I was taken advantage of because I wasn’t aware of what I was okaying. Is there anything that I can do at this point?

  31. Colin Robertson October 15, 2014 at 11:29 am -

    If you agreed to lock, you should accept some responsibility. Had rates gone up you probably wouldn’t be too upset. But seeing that they’ve dropped a good amount, you can certainly argue that they didn’t explain the lock process clearly to you and ask that they speak to the lock desk about lowering your rate in good faith. The squeaky wheel tends to get the grease in the mortgage world so negotiating and pleading your case is key. The $2,000 they’re giving you is probably just the lender credit for the given rate, it’s not a gift.

  32. Jig October 21, 2014 at 8:25 pm -

    I have signed a rate lock terms with my lenders 2 months ago, with a verbal commitment that if rates drop then they will honor the rates. today the rates drop more than 0.5%. I had signed for 3.57 and today other lenders are offering at 3.12% for 15 years and needed your help in deciding whether to go with the same high rate. my previous lender is unwilling to provide a lower rate. Please advise on whether to cancel the terms or not? Also if i wasn’t told of any cancellation penalties is it normal for lenders to charge cancellation fees for rate lock?

  33. Colin Robertson October 22, 2014 at 9:34 am -

    This is why verbal commitments aren’t really commitments after all…some banks charge rate lock cancellation fees, while others simply charge upfront for appraisal and credit report and those items might not be recouped if you go elsewhere. You can try to negotiate but if they won’t budge and rates are significantly cheaper elsewhere, it’d be tough to make a case for staying with your current lender, especially if you feel they already misled you.

  34. Jamieh. October 28, 2014 at 4:39 pm -

    Okay, Mr. Robertson. My mother was with the company “Green Point” in 2001, then in 2007 the company went bankrupt. The company “Greentree” is the current provider. They are not honoring the original contract, and refuse to send the original contract after it being requested on many of occasion. Should they still honor the contract, or are they allowed to change the rate? The original contract was set up for when she retired from the post office in 2013…but in 2013 when it was supposed to be paid off she was informed that she still had 7 years left. What if at all can she do? (sorry if this is worded badly, I am 18 and kind of don’t fully understand all of this lol)

    Thank you,
    Jamie

  35. Colin Robertson October 29, 2014 at 8:52 am -

    Jamieh,

    What did the contract say? What was her interest rate and what is it now? What is/was it supposed to be? I need some more details.

Leave A Response