Lock In Your Loan: What You Need to Know
When you’re securing a loan, one of the key decisions you’ll face is whether to lock in your interest rate. A “lock-in” guarantees a specific interest rate and points for a certain period—typically 30 to 60 days. This option is available at different stages depending on the lender, such as when you apply, during the loan process, after approval, or even later.
When Should You Lock In?
Locking in at the time of application is particularly valuable when interest rates are rising. It offers peace of mind, ensuring your rate stays the same despite any market fluctuations. However, if rates are dropping or expected to do so, it might be best to hold off until after you’ve been approved for the loan to lock in at a potentially lower rate.
The Cost of Locking In
While locking in can be a smart strategy, it isn’t always free. Some lenders charge an upfront fee for the lock-in, which may or may not be refunded if you decide to withdraw or if your application is denied. Others may apply the fee at settlement, which can be a flat rate, a percentage of the loan amount, or an extra fraction of a point on your rate.
Make sure you fully understand the terms before agreeing to a lock-in, as these fees can affect your overall loan costs.