"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a lender's promise to freeze a specific interest rate and a certain number of points for you for a certain period of time while your application is processed. This keeps you from getting through your whole application process and discovering at the end that your interest rate has gone up.
Rate lock periods can vary in length, anywhere from 15 to 60 days, with the longer period generally costing more. The lender can agree to freeze an interest rate and points for a longer period, like sixty days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of fewer days.
Other Interest Saving Strategies
In addition to opting for the shorter lock period, there are more ways you may be able to score the best rate. The more the down payment, the better your interest rate will be, as you will have more equity from the beginning. You can pay points to reduce your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for some is to pay points to improve the rate over the life of the loan. You'll pay more initially, but you'll come out ahead in the long run.
Ward Kilduff Mortgage can answer questions about rate lock periods and many others. Give us a call: (860) 658-7100.
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