What is a "rate lock period"?
What is a Rate Lock?
A rate "lock" or "commitment" is a promise from the lender to freeze a certain interest rate and a specific number of points for you for a certain period of time during your application process. This protects you from getting through your entire application process and learning at the end that your interest rate has gone up.
Rate lock periods can vary in length, anywhere from 15 to 60 days, with the longer ones generally costing more. The lending institution will agree to lock in an interest rate and points for a longer period, like sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.
Other Ways to Save on Interest
There are other ways to get a reduced rate, besides going with a shorter rate lock period. The bigger the down payment, the smaller the interest rate will be, because you will have more equity from the beginning. You can pay points to improve your rate for the life of the loan, meaning you pay more initially. One strategy that makes financial sense for some is to pay points to bring the rate down over the life of the loan. You pay more initially, but you will save money in the long run.
America's Money Source can answer questions about rate lock periods and many others. Call us: (407) 898-7559.
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