Rate Lock: Setting Your Interest Rate for Closing

One of the considerations that you should remember when negotiating a mortgage interest rate is the dance of the rate lock. You can lock in a rate now, and have it apply in the future. This can protect you from mortgage rate increases on your new home purchase, your second home purchase or your refinance. However, a bank will charge you for the rate lock, usually as follows, according to The Mortgage Reports:

• 15-day rate lock : 1/8 percent lower than the 30-day rate lock
• 30-day rate lock : The basis for all other pricing
• 45-day rate lock : 1/8 percent higher than the 30-day rate lock
• 60-day rate lock : 1/4 percent higher than the 30-day rate lock

This means that you need to plan your mortgage interest rate lock carefully. The Mortgage Reports recommends that if you plan to close at the end of January, you might actually be better off to move your closing a couple of days earlier so that you fall into the 45 day category, rather than being forced into the 60 day category.

Look carefully at your options, and consider a rate lock that will meet your needs, saving you money in interest and fees. Getting any mortgage loan can be more expensive than you bargained for, and a rate lock can help you manage the risk of increasing mortgage rates. Just be careful and think things out before you commit.