Real Estate Rate Lock
Mortgage interest rates heavily fluctuate over time. In today's real estate market, interest rates are at shockingly low levels. That being said, interest rates change consistently. Although close, the interest rate you would get today vs. a week from today may be slightly lower or higher. It may not sound like much, but even a fraction of a percentage can make a huge difference on your savings over a 30-year mortgage loan. But if you get your interest rate locked, it cannot change.
What is a Rate Lock?
Sometimes referred to as a Lock-In, this policy helps to ensure that your interest rate won't increase between the time you place an offer and close on a home, as long as no changes are made to the offer and you close within a set time-frame. Rate locks are typically available for 30, 45, or 60 days, and sometimes longer. If your rate is not locked, it can change at any time.
What is an extended Rate Lock (long-term lock)?
Sometimes delays happen. It is not uncommon for closing dates to change or get pushed back for various reasons. If this happens and you or your client exceeds their lock period, you may be able to get a lock extension. Lock extensions sometimes cost an extra fee. But if you don't extend your Rate Lock, you will pay whatever the market rate is at the time.
How can long-term locks benefit your clients?
Rate lock extensions are available to protect homebuyers against potential rising rates, but sometimes rates fall too. It can be unpredictable which way the market will fluctuate. Sometimes a rate lock could be a bad thing, if you have one in place and then interest rates fall. You would not be able to receive the new lower rates. This can be a hard thing to determine, but many people admire the reliability and assurance of a set rate if they are pleased with their current standing.
Can my rate go up even if it is locked?
The short answer is, yes. Three of the biggest reasons an interest rate would change even though it is locked, is if your credit score changes, the loan amount changes, or your verified income changes.
These changes are not uncommon. For example, the appraisal of the home could come in higher or lower in value than expected. The amount you can contribute to a down payment could change, or maybe your lender could not verify a recent promotion, bonus or overtime.
But, if everything stays the same on your offer and no numbers change, your rate will be locked in regardless of what the current market's rate would be.
Is a Rate Lock for me?
In the 2021 market, interest rates are expected to gradually increase as the year progresses. So a rate lock could be a great tool this year to help you take advantage of the current low interest rates.
If you are interested in learning more about the solution that makes sense for your unique needs, don't be hesitant to reach out and Van der Lande will be happy to help talk through the logistics with you.