"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 lock in a particular interest rate and a specific number of points for you for a certain period while your application is processed. This saves you from getting through your whole application process and learning at the end that your interest rate has gone up.
Rate lock periods can be various lengths of time, anywhere from 15 to 60 days, with the longer period typically costing more. The lender may agree to lock in an interest rate and points for a longer span of time, say sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.
More Ways to Get a Great Interest Rate
In addition to opting for a shorter rate lock period, there are several ways you can get the best rate. The bigger down payment you pay, the better your interest rate will be, because you will have more equity from the start. You can pay points to reduce your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to bring the rate down over the term of the loan. You pay more initially, but you will save money, especially if you keep the loan for a long time.
At Ward Kilduff Mortgage, we answer questions about this process every day. Give us a call: (860) 658-7100.
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