What is a "rate lock period"?

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Locking It In

When you are offered a "rate lock" from a lender, it means that you are guaranteed to keep a certain interest rate over a determined period while you work on the application process. This protects you from working through your entire application process and finding out at the end that your interest rate has gotten higher.

Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer spans typically costing more. A lending institution will agree to lock in an interest rate and points for a longer span of time, like 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

In addition to going with the shorter rate lock period, there are more ways you may be able to get the best rate. The bigger down payment you pay, the lower your interest rate will be, since you will have more equity from the beginning. You can pay points to improve your rate for the loan term, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to improve the rate over the term of the loan. You pay more up front, but you'll save money in the long run.

Ann Jones can answer questions about rate lock periods and many others. Call us at (512) 422-9036.

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