With the wild spike in interest rates last week it is important to understand how locking an interest rate in works. Once a property is in escrow we have the options of locking in an interest rate for the term of the escrow. If the rates go up the buyer is protected and if the rates go down we have the option of renegotiating a lower rate with the lender we locked in with or taking the loan to another lender and getting a lower rate. There is no cost or obligation when we lock or relock a buyer. Most lenders will charge an extension fee if the loan is not funded by the time the lock period expires but the locked rate is not lost.
How Does This Affect You ?
All kinds of strange things seem to happen when interest rates spike upwards. Real estate transactions are put in jeopardy because lenders do not get their buyers locked in and as rates go up the buyers are either unwilling to take the higher interest rate or worse yet, do not qualify anymore using the higher interest rate. Keep tabs on what interest rates are doing and talk to your clients and referral partners to keep everybody up to date and informed.
Comments(3)