Let's Talk Rate Lock Fees

By
Mortgage and Lending with Mortgages in AZ, CA, CO, DE, FL, GA, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI NMLS #138061 MMCD #1141

Rate Lock Fees

 

When getting a home mortgage, at some point along the way in the loan process, you have to "lock in" your interest rate.  Locking in guarantees the rate you're locked at.  If the market gets worse and average rates go higher, if you're locked in, you're protected.  Typically, if the market improves slightly and rates come down some, you're still locked into the locked rate.  If the market moves a lot, and rates come down substantially, most lenders will offer the opportunity to reduce your rate, or at least meet you half way with what's called a "float down".  Every lender has different policies with regard to float downs.

 

Rate locks come with a fee - it may not be an up front fee, but the cost for a lock is built into loan pricing.  For example, locking a rate for 75 days may come with a small fee or slightly higher rate than locking a rate for 30 days.  You can see additional fees if your rate lock "expires".  It's important to try to wrap up your loan within the allotted time of a rate lock, because it results in the best pricing for a borrower, and a good loan officer should be able to offer great advice on when to lock and when to "float", the alternative where a loan application is processed without locking in.

 

In markets where rates are improving, sometimes floating the rate makes sense, but the market can be volatile and move quickly, so it's a gamble to float your interest rate throughout the entire loan process.

 

One important aspect of rate locks, fees, and the loan process is potential delays.  Lenders will generally try to work with customers who have a rate lock expire due to no fault of their own - builder delays, property damage, illness, and many other things can cause a loan process to go longer than anticipated due to no fault of a borrower or a lender.  In these cases, lenders can be pretty understanding!  However, if the delays are borrower-related - you took a vacation during the loan process and were unreachable for weeks, you didn't send in requested documents in a timely fashion, or any other delay is caused by a borrower that could have been avoided, there will likely be fees associated with extending a rate lock.  

 

When a rate lock expires, most lenders will have a "worst case pricing" policy - if the market has improved, the lender may reinstate the old rate lock terms.  If the market has worsened, the customer may end up with worse pricing than they originally locked in.  This dissuades borrowers from intentionally letting rate locks expire (remember, most lenders have float down policies to help if the market improves!), because locking a rate puts the lender on the hook to deliver the loan to an investor, and locking comes with a cost to a lender!

 

With just about any mortgage loan, there will come a time to lock in the interest rate, so it's important to know what that entails, what the options are, and to be sure to lock in a rate that covers the time it will take to process a mortgage loan start to finish.  And perhaps the most important part of locking - work with a competent professional that understands the markets, the loan products, and can lock you into a loan with the best terms for your specific situation.

Posted by

John Meussner
NMLS ID #138061

It's more than a house - it's home.  So we offer a wide range of mortgage products at competitive prices to help our clients achieve financial security at home.  While we get great feedback on our prices and products, many clients say their favorite part of working with John Meussner & MasonMac is the level of service provided along the way.

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Comments (14)

Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good evening John,

Excellent post on locking rates. I'm sure you are seeing that occurring more now. Its always wise to work with a competent loan officer like yourself that understands the market, the loan products and can lock your interest rate with the best terms. 

Sep 01, 2022 05:08 PM
John Meussner

Thank you Dorie!  It's been a volatile market so knowing when to lock and when to not is important to saving our customers money! : )

Sep 01, 2022 05:27 PM
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

This is a really good article with great information on when and how to lock rates. 

The float down aspect is good to know too! It's not the easiest of times to buy a home right now so working with a good lender like you makes the process so much better!!

Thank you John Meussner 

Sep 02, 2022 12:56 AM
John Meussner

Thank you Debra!

Sep 02, 2022 11:45 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good morning John - you really need a lender who is a trusted advisor rather than an impersonal large organization.

Sep 02, 2022 03:16 AM
John Meussner

Amen to that!  

Sep 02, 2022 11:46 AM
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

John Meussner - Excellent information! Glad to see it was featured. It is so important for buyers to feel confident when they choose a Lender when buying a home or needing any type of loan. I am grateful you are consistent in providing educational material. 

Sep 02, 2022 04:32 AM
John Meussner

Thanks Patricia, I appreciate that : )

Sep 02, 2022 11:46 AM
Peter Mohylsky
PMI. Destin - Miramar Beach, FL

Thanks for the post.  I learn something new every day.  

Sep 02, 2022 12:42 PM
Jeff Dowler, CRS
eXp Realty of California, Inc. - Carlsbad, CA
The Southern California Relocation Dude

Great education here, John. There's a lot to know. No doubt the volatile market makes knowing when to lock or not more complicated.

Jeff

Sep 02, 2022 04:28 PM
John Meussner

Thanks Jeff, and you're right - we see daily movements in rates these days that used to take a week.  We could sit back knowing the market wouldnt move much.  Not anymore!

Sep 03, 2022 10:20 AM
Joan Valverde
HomeSmart - Colorado Springs, CO
GRI,CDPE,CNE,MRP,SRES Colo Sprgs, Blk Forest, Monu

Hello John,

Thank you for the great information.  Just goes to prove that nothing good comes for "free".  Locking rates is now more important than ever with the rising rates.  Have a great weekend!

Sep 02, 2022 09:24 PM
John Meussner

Thanks Joan Valverde !  Hope you have a great weekend as well :)

Sep 03, 2022 10:19 AM
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Fears are always tricky especially with the types of fees that really lock you in. I totally get it

Sep 02, 2022 10:13 PM
Mark Don McInnes, Sandpoint-Idaho
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

Hello John.  As always a very educational up to date post.  Volatility is the new key word right now thru out the business.  When asked lender questions I do not even guess.  I send my clients to a professional like yourself.  Enjoy the rest of your weekend.  Be safe.  m 

Sep 03, 2022 03:50 PM
John Meussner

Thanks Mark, appreciate the comment.  Volatility for sure, things have changes in terms of cost and activity so much in such a short time, we'll have to see how things settle!

Sep 06, 2022 09:17 AM
Matt Brady
Watermark Capital - Del Mar, CA
One of San Diego's Best Lenders

Hi John, there are lenders that offer extended rate locks with a float down built-in if rates improve. They are available for 4, 6, and 9 months.

Sep 05, 2022 11:13 AM
John Meussner

Hi Matt - that's how our longer term lock is designed as well, with a 1 time float down while locked.  Thanks for the comment!

Sep 06, 2022 09:18 AM
JS Lee
CAI - Acton, CA
Mortgage and Remortgage Expert

Hi John. You only mentioned locking the loan at the start. Current mortgage holders may be offered or ask for fixing the rate, aren't they?

Sep 07, 2022 04:53 AM
John Meussner

Hi JS Lee - for anyone that's already taken out a mortgage, it would be a note modification to switch from an adjustable rate to fixed rate.  Adjusting a note is typically only done with a refinance or modification.  An actual "rate lock" is done as part of the loan origination process.

Sep 08, 2022 01:13 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

John, thanks for the explanation of rate locks, and all buyers need to know this information!  

Sep 13, 2022 06:12 AM