What is a mortgage interest rate lock?

Say you’ve been shopping mortgage interest rates, and have been offered a deal you can’t pass up. So you filled out the loan application and submitted it for approval. While waiting to get the approval, the market fluctuates and interest rates go up and down. Wouldn’t it be nice to have a guarantee (or something close to it) that the deal-of-a-lifetime interest rate, that enticed you to go for the loan, will not change by the time your loan gets approved?

This is exactly what a mortgage rate lock, also called a mortgage lock-in or rate commitment, does; it locks in a certain interest rate and points for a specified amount of time, protecting you from market fluctuations and interest rate increases.

Therefore, as you shop rates among different lenders, don’t rely on the interest rate and terms the lender quotes, unless the lender is willing to offer a lock-in. A mortgage rate lock is the only guarantee that you will receive these terms at the time your loan is approved.

Get the mortgage rate lock-in writing!

Some lenders will only lock-in the interest rate, and not the terms or points associated, while others will lock-in the interest rate, points and terms. This is why it is crucial to ask for the rate commitment in writing, if possible. Not only will it prove to be useful should a dispute arise, but it will also allow you to fully understand how the lock-in commitment works. Some lenders may only offer a verbal commitment, which when it comes down to it, can be difficult to prove in the event of a dispute.

Also, it varies between lenders when they will lock-in an interest rate and points, it could be at the time you apply, during processing when the loan is approved