Since mortgage rates have been in near freefall this week several people have asked me about breaking mortgage rate locks. Here’s the skinny you need to know about locking in your mortgage rate.
While most mortgage brokers will tell you that a rate lock is an agreement between you and the lender that you cannot walk away from, the truth is that you can and the pressure you mortgage broker is applying is a load of crap. Can’t say that I blame them, after all their commissions are on the line…but the truth is you can walk away from the table at any time…Even After You’ve Signed The Contract.
Mortgage Rate Locks
What is a mortgage rate lock? Really all rate locks are is a “promise” from your lender to give you a certain mortgage rate if you close before the lock expires. Are mortgage lenders obligated to honor their rate locks?
The answer may surprise you… No, lenders are not obligated to honor thier own rate locks. Mortgage lenders build so much wiggle room into their rate locks they can back out of them almost at will. You’re not signing a contract when you lock in your mortgage rate but if rates go down 99% of lenders will not give you the lower rate.
If your mortgage lender refuses to give you the lower rate why should you stay? A mortgage is a huge financial commitment and you should make sure you’re getting the best possible deal before signing on the dotted line. Don’t ever let a mortgage broker or lender pressure you into thinking that since you’ve locked in a mortgage rate you’re obligated to take out the loan. This type of pressure sales is not only unethical but a despicable practice.
Your Rights Under The Law
You can walk away from the table at any time. If you’re being pressured by a broker or your gut tells you something isn’t right, walk away. Mortgage brokers and lenders are a dime a dozen and there are honest people working in this industry that want to get you a good deal in exchange for your business. What can you do if you already signed the loan contract? You still have time to change your mind. There are three business days before your loan is funded that you can change your mind and walk away from the deal. See Three Day Rescission for more information about backing out before your loan is funded.
To summarize, a rate lock does not mean you are obligated to borrow. Never let anyone pressure you into any type of loan…this is a sure recipe for disaster. Do your homework, learn about Yield Spread Premium and make informed decisions when it comes to your mortgage. All the information you need to do this is available for free on this website.
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I signed a Standard Rate Lock Agreement with a lender who is the lending arm of the builder/developer in January of 2021. The rate lock fee was $6,000 which the lender said I would pay at closing, and with seller credits at closing that the rate lock fee would essentially be erased. In the Agreement it stated the rate lock would expire on May 30th. Because I am buying a new construction condo and there have been many delays in construction the condo won’t be completed until maybe September. So, in July I decided to Cancel my mortgage loan with lender and go with my local bank for the mortgage. My local bank gave me a 60-day rate lock for $135. The original lender is not happy that I decided to cancel the loan with them, and are trying to force me to pay the $6 000 rate lock fee. So, my question is this, are they able to force me to pay the rate lock fee even though I am no longer using them as my lender? The mortgage company is TBI Mortgage which is owned by Toll Brothers who is the builder and who my purchase contract is with. TBI said that Toll already paid the rate lock fee to them, and now I owe Toll Brothers for that fee, and Toll will force me to pay. Is that correct…that Toll Brothers can force me to pay the rate lock fee even though i am not using there lender for the mortgage? Thank you for any assistance you can provide me.
Hi Patrick, just wondering if you found out the answer to your question with TBI mortgage. I have the EXACT same situation going on right now. Thanks in advance.