28 May The importance of locking mortgage rates
What exactly is a rate lock mortgage? What is the advantage of having one? A rate lock refers to an agreement between a mortgage lender and a borrower to fix a certain interest rate or a number of days between the announcement of a mortgage approval and closing of the real estate purchase and mortgage loan. The rate lock protects the borrower against mortgage rates rising in the month or months between initial approval and closing.
If you are interested in locking your interest rate, there are a few things you should consider before you make a decision. One of the important things is that mortgage rates are tied to movements in the financial markets. Mortgage rates can fluctuate daily, and like other marketable items, are subject to immediate change based on market conditions. However, mortgage rates have a substantial effect on the monthly payment of the borrower, and if the market rates change rapidly and substantially, it may affect the ability of the buyer to purchase the home of his or her choice.
When a homebuyer applies for a mortgage loan, the interest rate quoted at the initial application may not be available by the closing date. Most loan applicants would prefer that mortgage rates do move down during this period. If mortgage rates rise, the applicant’s payment will also be higher than previously thought. So, If your budget is already stretched to the limit when you apply for the loan, locking the interest rate could be a wise move.
At The Costa Group, we understand that even a small adjustment of the mortgage rate will have a great effect on your payment and eventual payoff. Let us help you make the best decision.