What is a "rate lock period"?

Freezing the Rate

A rate "lock" or "commitment" is a promise from the lender to set a specific interest rate and a certain number of points for you for a certain period of time while your application is processed. This ensures that your interest rate won't rise as you are going through the application process.

Although there can be a choice of rate lock periods (from 15 to 60 days), the extended ones are typically more expensive. The lending institution may agree to hold an interest rate and points for a longer span of time, say sixty days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of fewer days.

Additional Ways to Save on Interest

There are more ways to get a reduced rate, besides agreeing to a shorter rate lock period. The larger the down payment, the better your rate will be, as you will have more equity from the beginning. You can pay points to lower your interest rate over the life of the loan, meaning you pay more up front. One strategy that is a good option for many people is to pay points to reduce the interest rate over the life of the loan. You'll pay more initially, but you will come out ahead, especially if you don't refinance early.

AmeriBest Mortgage can answer questions about rate lock periods & many others. Give us a call: (321) 777-7277.

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