A rate lock is a lender's guarantee that they will hold a specific interest rate for you for a set period, usually 30 to 60 days. It protects you from rate increases while your loan is being processed.
When you apply for a mortgage or refinance, there is a gap between your application and closing. During that time, interest rates can move up or down. A rate lock freezes your offered rate so that even if market rates rise, you keep the lower locked rate.
Rate locks typically last 30, 45, or 60 days. Longer lock periods may cost slightly more because the lender takes on additional risk. If your closing gets delayed past the lock expiration, you may need to pay a fee to extend it or accept the current market rate, which could be higher.
Some lenders offer a float-down option with the rate lock. This means that if rates drop significantly after you lock, you can take advantage of the lower rate (usually with some conditions). Not all lenders offer this, and there may be an additional fee, so ask about it before locking your rate.
The annual percentage rate is the total yearly cost of borrowing, including interest and fees, expressed as a percentage. APR gives you a more complete picture of loan cost than the interest rate alone.
Fixed-Rate MortgageA fixed-rate mortgage has an interest rate that stays the same for the entire loan term. Your principal and interest payment never changes, making it easier to budget.
RefinanceRefinancing means replacing your current mortgage with a new loan, typically to get a lower interest rate, change the loan term, or access your home equity through a cash-out refinance.
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