If you’re shopping for mortgage rates today from the best mortgage lenders like Amerisave, the topic of rate locks is going to come up. Should you, when, how long, and should you pay to lock your refinance mortgage rates are all valid concerns that could save or cost you a lot of money. Here are basic rate lock tips to make sure you don’t miss out on today’s lowest refinance mortgage rates.
Lock or Float Your Refinance Mortgage Rates?
Mortgage rate locks are essentially an agreement between you and a lender to ensure you’re getting a certain interest rate and loan terms. The quotes you get when shopping for mortgage refinancing don’t mean much until locked in by the bank or lender.
When you lock your refinance mortgage rates you’re securing that interest rate and loan terms, assuming you meet other qualifying factors. (like credit and loan-to-value ratio) Once you’ve locked your mortgage refinance rates and conditions such as term length, points, prepayment penalty. If you’re refinancing with an Adjustable Rate Mortgage your initial, periodic, and lifetime caps are also set.
How Long Should You Lock?
The purpose of a rate lock is to allow enough time to close on your refi. Typical rate locks run from 7 to 90 days, longer in some cases. Some lenders will allow you to extend your rate lock if it expires; however, some will not meaning you’d be losing the refinance mortgage rates you initially locked.
You have several choices when it comes to when to lock your refinance rates. You can lock when submitting your application for mortgage refinancing, known as a pre-lock. This ensures your refinance mortgage rates are locked before your home loan is underwritten. Some homeowners choose to float their mortgage rates and lock at the last minute, gambling that rates won’t go up while their application is being processed.
It’s up to you to choose when to lock in your mortgage rates; however, once you do if you don’t get the rate lock in writing it never happened. Don’t assume the lender or broker will lock your interest rate.
Beware Sleight-of-Hand Changes
Some brokers may offer to change your loan terms when refinancing to get you a better interest rate. They often do this by adding or raising a prepayment penalty, changing caps or indexes, or even programs. Always read the fine print and don’t be afraid to question or even get a second opinion when it comes to things like refinance rates, terms, or program changes. Any mistakes you make when it comes to locking your refinance mortgage rates will result in a higher loan costs. Who wants the stress and headache of a botched mortgage loan?
You can learn more about getting the lowest possible refinance rates while avoiding unnecessary fees by checking out my free Underground Mortgage Videos.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
