How to Lock in Your Loan Rate
by Fern J. Lopez
When you apply for a home loan, you will be given a rate, but that rate is for that day only. Obviously, you will not be closing on your new house that same day, so you have to worry about what the rate will be at a later point.
But lenders today frequently offer their clients a lock in period for their mortgage at the time of application. They know that the time between deciding on shopping for a home and actually finding and closing on it may take some time. Many people use the interest rate when they calculate how much their monthly mortgage costs will be. Most homeowners find it better to have a lock in period so they can count on their monthly home loan payment calculation. Both interest rates and points can be locked in.
The lock in rate may be fixed at the application point, the processing stage or the approval stage of the home loan.
Perhaps you have a chance to lock in 5.5% interest with one point for 30 days. You then have the right to borrow at 5.5% even if you are not going to close on the mortgage for the next thirty days. This is a normal lock in period, and many lenders offer it to attract customers, and are willing to take the risk for this short period of time. Longer periods can also be obtained, but usually are priced more, since lenders are not going to risk rates increasing for a longer period without some compensation for the risk.
One of the problems of a lock in rate, however, is that if rates in general decrease, you may be hit with the higher rate, unless there is an opt out clause edmonton mortgage brokers. Make sure your bank is willing to use to the lower rate in case of lower interest rates.
Once the 30 day period is up, your agreement expires and you will be given whatever the new market rate is calgary mortgage rate. If rates have not changed, you may be able to extend the lock in term.
Lock in periods cover a number of mixtures of terms, as follows:
Locked in Interest Rate with Locked in Points. In other words, the lender will maintain both the interest rate and number of points for 30 days.
Locked in Rate, floating points. The base rate stays the same, but the points may change. In order to maintain the original rate, you may have to pay extra points.
If interest rates are moving a lot, it is probably a good idea to ask your banker about lock in periods.
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