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What is a "rate lock period"?

What is a Rate Lock?

A rate "lock" or "commitment" is a lender's promise to lock in a certain interest rate and a specific number of points for you for a specified period of time during your application process. This prevents you from getting through your entire application process and learning at the end that the interest rate has risen higher.

While there are several lengths of rate lock periods (from 15 to 60 days), the extended ones are generally more expensive. A lending institution will agree to freeze an interest rate and points for a longer period, like 60 days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of fewer days.

More Ways to Save on Interest

There are more ways to get a low rate, in addition to opting for a shorter rate lock period. The more the down payment, the smaller your rate will be, since you will be starting with more equity. You can pay points to improve your interest rate over the term of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to reduce the interest rate over the term of the loan. You are paying more initially, but you'll save money, especially if you don't refinance early.

Greystone Loans, Inc. can walk you through the pitfalls of getting a mortgage. Give us a call: (909) 467-1090.

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