A mortgage rate lock is an agreement between you and your lender to “lock in” a specific interest rate for a set period. A rate lock ensures that your rate won’t go up, even if market rates increase before your loan closes. A rate lock is an “insurance policy” against rising rates.

Interest rates change with market conditions at least daily – sometimes multiple times a day. “Floating” means your rate is “TBD,” subject to these changes. Locking secures the interest rate you’ll pay on your loan, protecting you from market volatility.

A “standard” rate lock lasts 30 days, but longer and shorter lock periods are available—most commonly in 15-day increments, from 15 to 90 days. Extended locks of 120, 180, 270, or even 360 days may be an option for homes under construction.

Longer locks generally cost more, but extending a lock set to expire before you can close also carries a cost. An ideal lock is long enough to close – maybe with a little cushion for unexpected delays. 

Locking your rate shifts market risk from you to your lender – the longer the lock period, the greater the risk. (More time means more potential for market movement.) Lenders manage this risk using financial instruments that carry costs that increase with duration. These costs are passed through to you. 

See the “Let’s Get Technical” section (below) for more information.

A “floating fixed rate” is the “jumbo shrimp” of lending terminology, isn’t it? “Float” and “lock” refer to your rate lock, not the type of loan. While floating, your future fixed rate is yet to be determined. Loan types are either “fixed” or “adjustable”. Fixed means fixed. Once you lock, that’s your rate for the entire loan term. And if you’ve chosen an adjustable-rate mortgage, you’ll still “lock” the initial rate. 

Nothing! Locking a rate doesn’t obligate you to move forward with a loan. If a home inspection reveals that your dream home is actually a money pit, no problem. (Bummer, of course, but no problem.) Cancel your offer and we’ll cancel your lock. When you find another property, we’ll start from scratch. 

Most rate locks are free. A rate lock determines certain costs you’ll pay at closing, but you typically won’t pay a fee when you lock. Exceptions are longer-term rate locks (over 90 days) or some locks with special features (like a “float down” option). 

Most of our clients lock as soon as their offer is accepted. There’s a lot going on when purchasing a home. Locking means one less thing to worry about. It also firms up your monthly payment and the cash you need to close. If the timeline for your closing is nebulous or unusually long, we may recommend waiting to lock. But floating is always risky – especially if you’re close to the limit of what you qualify to borrow or can afford to pay. Financial markets have a terrible habit of worsening quickly and improving slowly. If rates go up, you may not have time to wait for them to come back down. 

The exact timing varies depending on your loan program and processing times, but you’ll need to lock 7 to 10 days before closing. The last days before closing can feel like a lull in the action. Far from it! We’re busy bees behind the scenes – clearing your loan for closing, preparing loan documents, and coordinating with your settlement agent. We can’t start these steps until your rate is locked.

Possibly! Our “Lock ‘N’ Roll” program lets you lock for 60 to 90 days while you shop for a home. 
Locking can bring certainty to an element of your house hunt that’s usually up in the air. Lock ‘N’ Roll really shines as a risk-management tool whenever higher rates might make a home purchase unaffordable or impact your loan approval. However, starting a 90-day countdown adds timing pressure that may not be ideal if the timeline for your home search is fuzzy. 

Yes! Although we always lock a specific rate and cost, locking most loans also freezes a menu of other rate options. After locking one option, you can toggle to another. 

The lender lingo for your set of options is a “pricing stack”. Your locked pricing stack doesn’t change with market conditions. It’s not a perfect analogy, but I always picture a fancy, farm-to-table restaurant – the kind with a new menu every day. Until you lock, your menu of rates changes daily, too. After you lock, the chef stops changing the menu. You can change your order, but the menu you’re ordering from stays the same. 

Last call to change your “order” varies but is usually 7-10 days before closing.
We’ll send paperwork showing the initial rate-and-cost combination as locked. Please sign these, even if you’re mulling a change. Signing only acknowledges receipt – updates will follow if you decide to make a change. 

Maybe! Many loans offer a “float-down” or “rate renegotiation” option. Rate locks with a float-down option gives you the best of both worlds – the security of a rate lock with no FOMO if rates fall significantly.  Rates must cross a certain threshold to be eligible for a renegotiation—usually a .25% improvement versus the rate you locked. 

Exercising a float-down typically costs 0.375% of your loan amount. However, improvements to the market may partially or entirely cover this cost. A no-cost-to-you float-down is possible. 
The rate renegotiation fee offsets your lender’s “hedging” costs. (See the “Rate Locks: Let’s Get Technical” for more about hedging.)

Yes! You can almost always extend a rate lock – for a cost. Policies and fees vary depending on the program. If you need more time on an expiring rate lock, we’ll explain the options for your loan and work with you. 

Extensions typically cost 0.02% of the loan amount per day for our most popular loans. For example: $500,000 x .02% = $100 per day. Even a few days can add up! 

It’s almost always cheaper to lock for longer upfront than to extend. Let us know if closing could be delayed so we can strategize to minimize costs. 

If your rate lock expires, your loan costs will likely increase. Unless closing is delayed for an unusually long time, extending a lock is better than letting it expire.

Rules and fees for relocking an expired lock depend on the loan program. Relocking within 30 days usually triggers a relock fee. You’ll be subject to worst-case pricing between your old rate lock and current market conditions. 

In the most literal sense, there are no such thing as “rate locks”. Rates come from ever-changing financial markets that don’t have a “pause” button. (Believe me, I’ve looked. It’s not there.) 
It’s more accurate to think of your “rate lock” as an assignment of risk. While floating, market risks are yours. If rates get better or worse, it’s your gain or loss. Once you lock, your lender shoulders the risk. The markets keep on truckin’ on, getting better or worse (or both) over time. But that’s not your problem anymore, it’s ours. 

Technically speaking, there’s no such thing as actual, literal “rate locks”. Rates come from financial markets that trade daily on Wall Street—and Wall Street doesn’t have a “pause” button. 

There’s no magician’s wand that can freeze financial markets, but there is some financial wizardry behind every rate lock. So, step right up, everyone, and behold, as I pull back the curtain and reveal the magic…of rate locks! (Ahem.) (Sorry.) (I got a little carried away for a minute there.) 

Rates come from financial markets that trade daily on Wall Street—and Wall Street doesn’t have a “pause” button. So, “rate locks” are just an assignment of risk—are you or your lender taking on the risk as financial markets change? Locking your rate hands that risk over to your lender.

Once we shoulder this risk for you, we can’t just roll the dice and hope for the best. Eventually, we loans into a secondary mortgage market. This sale is how we lenders get our money back so that we can lend it again (and again.) But we can’t sell a loan until it’s closed. 

If we lock your rate a few weeks before closing and sell it a few weeks after, we’re on the hook for about 60 days. We promised you a rate with no idea what the market will look like in 2 months when we have a loan to sell. 

A lot can happen in two months. If rates worsen, we’ll lose money on the sale of your loan. Multiply that by many loans for many clients, and the potential losses get really big—big enough to put a lender out of business. That’s not good for anybody. We like working here. And you’re counting on us for a loan to buy your home. 

Here comes the wizardry:
When we lock your rate, we buy an asset we know will move in the opposite direction as rates change. This maneuver is called “hedging”. Now, if markets shift for the worse before we close and sell your loan, we’ll make up our losses on your loan with profits from the hedge. (This cuts both ways. If markets improve, we’ll make money selling your loan that we’ll lose on our hedge.)
Through the magic of hedging, you can lock a rate and rest easy, knowing we’ll deliver the rate we promised – no matter what the market does. 

The longer your rate lock, the greater the risk to your lender. More time means more potential for market movement between the day we lock your rate, and the day we sell your loan. 

As discussed in “How can lenders lock a rate when the market keeps moving?”, we manage our risk through financial instruments that offset our risk. These instruments are contracts with costs that increase with duration. We gotta pass these costs to you. (I hope you understand.)

But if there’s a chance closing may be delayed, it’s almost always cheaper to buy a longer lock upfront. Extending for a week often costs as much as securing an extra 30 days on an initial rate lock. If you can give us your best guesses for the worst-case timing, we’ll share the options and help you make a sound decision.