What is a "rate lock period"?

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Freezing the Rate

A rate "lock" or "commitment" is a promise from the lender to lock in a certain interest rate and a particular number of points for you for a certain period during your application process. This saves you from getting through your whole application process and learning at the end that the interest rate has risen higher.

While there may be a choice of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. The lender may agree to lock in an interest rate and points for a longer span of time, say 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

Other Interest Saving Strategies

There are more ways to get a reduced rate, besides opting for a shorter rate lock period. The bigger down payment you pay, the lower your rate will be, because you will be entering the loan with more equity. You can pay points to lower your rate over the term of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to improve the interest rate over the term of the loan. You will pay more initially, but you will save money, especially if you don't refinance early.

Pacificwide Lending can answer questions about rate lock periods and many others. Call us at 925-461-0500.

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