How to Lock in a Mortgage Rate

What Is a Lock-in?

A lock-in is sometimes known as rate-lock. When searching for your mortgage, you would finally come to the one with the rate you are satisfied with, and you really want to stick to it. A lock-in is to ensure that you will get what you want upon the settlement, regardless of rate changes occur during the period of your mortgage loan application process.

How to Lock In a Mortgage Rate?

• Get your documents ready. A lock-in is usually valid from a week to several months. Therefore, the settlement must occur within that period, or otherwise void. If there are issues need to be clarified in the loan process, it may be dragged a bit here and there. And it could be a challenge to meet the lock-in deadline. Hence, to get all your documents completed and ready is utmost important to make sure the settlement is done within the lock-in validity period without delay.

• Make sure the lock-in is written in black and white. You have to get the bank officer to provide you with the details of the lock-in, written in the loan commitment letter. The details should include, but not limited to, the lender's name, your name, size of mortgage, lock-in rate, charges incurred and duration of lock-in. Read the fine prints to avoid being caught up with unnecessary terms.

• Make sure your lock-in period is long enough. The longer the lock-in period, the more likely the settlement can be done within that period. Therefore you may want to negotiate for longer lock-in period even though that could mean you have to sacrifice your point.

• Reconfirm your intention. There are pros and cons of locking in a mortgage rate. If interest rate rises after the lock-in, you are better off. However, if you fail to predict it right, you tend to lock in to the higher interest rate should interest rate falls. After all, it is not easy to predict interest rate movement. What you could do is to stay tuned to economic climate and do your own research.

• Ask for a float down option. What could worry you the most is fall of interest rate after you have locked in the mortgage rate. Before deciding on the lock-in, convince the lender to put in the float down clause to enable you to opt for lower rate should interest rate falls. If the lender seriously want the business, they would agree to it, with some conditions perhaps.

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