"Rate Lock" and other Ways to Get a Lower Interest Rate

Locking in your Interest Rate

A rate "lock" or "commitment" is a promise from the lender to freeze a specific interest rate and a particular number of points for you for a certain period of time while your application is processed. This keeps you from going through your whole application process and discovering at the end that your interest rate has gotten higher.

Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer ones generally costing more. The lender will agree to freeze an interest rate and points for a longer period, such as 60 days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of fewer days.

More Ways to Save on Interest

There are more ways to get a good rate, besides agreeing to a shorter rate lock period. The more the down payment, the lower your interest rate will be, since you will be entering the loan with more equity. You can pay points to reduce your interest rate for the term of the loan, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to bring the rate down over the life of the loan. You'll pay more up front, but you'll come out ahead in the end.

ADVISORY MORTGAGE can walk you through the pitfalls of getting a mortgage. Call us: 8102292820.