Lock in your mortgage rate now to avoid market shifts

A mortgage rate lock ensures the interest rate on your mortgage stays the same for a set period of time, typically from the initial quote to closing. If you lock in your rate, and then market rates rise before the loan closes, your rate won’t increase — provided you close within the lock window and make no material changes to your loan application.

It’s typically up to you to seek the rate lock, and skipping one isn’t always a bad strategy, especially if interest rates are falling or low in general. It just depends on the market when you buy and your risk tolerance.

When can a mortgage rate be locked?

It depends on the mortgage lender. Some lenders offer a mortgage rate lock after you are preapproved for a mortgage, while others might wait for the seller to accept your offer first.

If you lock in too early, however, you might end up needing more time to find a home and face extension fees or a new, potentially higher rate. If you’re just starting to look at properties, consider waiting to lock.

If you’re already a homeowner and want to refinance to a new mortgage, it’s best to lock your rate as soon as you find an attractive offer — ideally one that’ll save you money. This is especially important since 79% of refinancers overpay, according to data from Bankrate’s Hidden Homeownership Tax study.

How long do mortgage rate locks last?

Initial mortgage rate locks can last anywhere from 30 to 120 days, depending on the lender and type of mortgage. You’re most likely to see rate locks for 30 days, but some lenders offer 60-day rate locks. Higher than that is possible, but it’s uncommon.

For example, if you lock in a rate of 6.68% for 45 days, and market rates then jumped to 7% within that period, you’d still get your loan at the lower 6.68% rate. If you don’t close within that 45-day period and rates go up, your mortgage will be readjusted to match the market.

The mortgage market can be unpredictable, which is why a mortgage rate lock can be a smart choice.

— Bob Driscoll Senior vice president and director of Residential Lending at Rockland Trust Bank in Norwood, Massachusetts

For the lock to be enforceable, you’ll need to adhere to conditions set by the lender. These typically include closing the loan within the allotted time frame and avoiding any major changes to your mortgage application, such as shifting to a different loan program. If you don’t close within the lock window, you might have the option to extend it, often for a fee.

How much does a rate lock cost?

Initial mortgage rate locks typically don’t cost an out-of-pocket fee. Rather, the cost is baked into the rate. If your lender does charge for an initial lock, it could be anywhere from 0.25% to 0.50% of your loan amount.

You will pay out of pocket, however, if you need to extend your rate lock or want a float-down option. The rate lock extension fee is often a percentage of the loan amount, and the longer the extension, the more you’ll pay.

What to know about locking a mortgage rate today

Mortgage rates just hit a 13-month high at the beginning of September, but that doesn’t guarantee they’ll stay that way. If you’ve been waiting for lower rates to buy a home or refinance, now could be a good time to lock — it’s possible they’ll continue to rise in the coming months.

What about times when rates seem stable? A rate lock might still give you peace of mind. If you were to lock in a 30-year mortgage rate of 7% on a $400,000 loan. At this rate, you’d pay $558,036 in interest over the life of the loan. If you don’t lock your rate and rates rise to 7.25% by the time you close, you’d pay $582,334 in interest — a difference of $24,298. 

You can use Bankrate’s mortgage calculator to get a sense of what you’d pay based on your locked-in rate.

What happens if market rates drop?

If market rates go down, you might be able to get a lower rate even after locking if your lender offers a float-down option. This usually comes with a fee and some conditions. Your lender may require rates to fall by a certain amount, for example, before the float-down option kicks in.

“The cost to extend depends on various factors, including where current rates stand at that time,” says Brian Shahwan, vice president, mortgage banker and broker at William Raveis Mortgage. “Some lenders allow for a free extension of up to 30 days, while others charge fractional points depending on the length of days needed to extend.”

Bottom line

A rate lock is just one piece of the mortgage origination process.

“Rather than asking questions regarding the rate at the preapproval stage, or without an accepted offer, I would suggest asking questions about overall closing costs and available credits,” Shahwan says, “along with recasting and post-close rate modification services, opportunities for a rate float down and financing options specifically for the type of home you are interested in.”

The most important thing you can do when looking for a good rate is to compare lenders. Find ones that offer low rates, competitive rate lock options and other programs that will help make your home affordable after you buy it.