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

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Locking in your Interest Rate

A rate "lock" or "commitment" is a lender's promise to set a certain interest rate and a specific number of points for you for a certain period of time while your application is processed. This ensures that your interest rate will not go up as you are working through the application process.

Rate lock periods can vary in length, between 15 to 60 days, with the longer ones typically costing more. The lending institution can agree to lock in an interest rate and points for a longer period, such as sixty days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.

Other Interest Saving Strategies

There are other ways to get a better rate, besides going with a shorter rate lock period. The bigger the down payment, the better the interest rate will be, because you will have more equity from the start. You might opt to pay points to reduce your interest rate over the term of the loan, meaning you pay more up front. One strategy that is a good option for some is to pay points to reduce the rate over the term of the loan. You will pay more up front, but you will come out ahead in the long run.

Nova Home Loans can walk you through the pitfalls of getting a mortgage. Give us a call at 720-279-5932.