Deciding Upon a Lock in Period for Your Home Loan
by Fern J. Lopez
When you are shopping for mortgage rates, you have to understand that the terms you are quoted are the terms in force at the time of the quote. Usually, you don’t close on the exact day you are inquiring about rates, so you will have to take the risk that the rate will go up.
In reaction to this problem, many banks offer to lock in a rate for a certain length of time alberta mortgage rates. It is only normal to realize that there will be a delay between when the loan is negotiated and the home is closed on. And since most people calculate how much mortgage they can pay for based the interest rate, they realize people want to maintain that rate alberta mortgage. Locking in a rate for a length of time frequently proves to be a good idea for a borrower. This applies to either interest rates and points.
The lock in rate may be fixed at the application stage, the processing stage or the approval stage of the mortgage.
Perhaps you have the opportunity to lock in 5.5% interest with one point for 30 days. What this gives you is the right to have that rate, even if you do not close on the loan for an additional 30 days. This is a fairly common lock in time that banks offer to attract customers. Lenders are not usually willing to give such a guarantee for greater than 30 days, with a greater chance of rates going up, unless the borrower pays a premium.
Keep in mind, however, that a locked in rate can prevent you from taking advantage if interest rates actually decrease, unless you have an agreement that prevents this from occurring. You have be sure to negotiate such a benefit ahead of time.
After the 30 day period, of course, the rate will revert to whatever the prevailing market rate is. The bank will normally allow you to extend the period, as long as there have not been wide movements in interest rates.
There are also a great many combinations you can have.
Locked in Rate, locked in points. In other words, the bank will keep both the interest rate and number of points for 30 days.
Locked in rate, but no points locked. The basic rate is fixed for the period, but the bank keeps the right to change the points. The lender can charge additional points if they wish.
If you are in a period of very volatile interest rates, it may be well worth the time to have a lock in term, even if you have to pay for it.
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