How Long Does a Mortgage Rate Lock Last?

A mortgage rate lock is an agreement between a borrower and a lender that secures a specific interest rate for a home loan over a defined period. This protects borrowers from potential interest rate increases between the loan application and closing, providing certainty regarding future mortgage payments despite market fluctuations.

Understanding Rate Lock Durations

Mortgage rate locks typically come in various durations, with common periods being 30, 45, or 60 days. Some lenders offer longer options, such as 90, 120, or 180 days, for situations requiring extended processing. While longer lock periods offer stability, they may come with a higher interest rate or an upfront fee due to increased lender risk. The chosen duration must align with the anticipated closing timeline to avoid complications.

Factors Influencing Rate Lock Duration

The type of loan, such as conventional, FHA, VA, or jumbo loans, can dictate the standard lock periods available from a lender. Lender policies also vary, with different institutions offering diverse standard lock periods and conditions. Current market conditions play a role, as lenders may offer shorter locks or charge more for extended periods during volatile interest rate environments. Loans requiring more extensive documentation or longer underwriting processes, like those for new construction homes or self-employed borrowers, often necessitate longer rate locks.

Managing Your Rate Lock

If a loan does not close within the specified rate lock period, the rate typically defaults to the current market rate, which could be higher than the original locked rate. To prevent this, borrowers can often request a rate lock extension, although this usually involves an additional fee or a slight increase in the interest rate. Extension fees can range from 0.25% to 1% of the loan amount, or they might be a flat fee, potentially costing several hundred to several thousand dollars depending on the lender and the extension length. In situations where market rates decline significantly after a rate lock, some lenders offer a “float-down” option. This allows borrowers to adjust their locked rate to the new, lower market rate, typically for a fee of 0.25% to 1% of the loan amount. Communication with the lender is important to monitor the loan’s progress and the rate lock’s expiration date.

Strategic Considerations for Locking Your Rate

Deciding when to lock a mortgage rate involves assessing current market trends and personal financial risk tolerance. If interest rates are trending upward, securing a rate lock sooner can protect against higher future payments. Conversely, if rates appear to be declining, waiting to lock might allow for a lower rate, though this carries the risk of rates increasing unexpectedly.

It is often beneficial to lock in a rate once the loan application is robust and the closing date is reasonably firm, typically after an offer has been accepted on a property. Locking too early could lead to the lock expiring before closing, potentially incurring extension fees. Consulting with a loan officer is advisable to receive personalized guidance based on prevailing market conditions and the specific loan timeline.