Mortgage interest rates can move up and down, and it’s impossible to predict what they will do in the future. Getting a rate lock is one way to protect yourself against higher rates.
However, you need to understand how rates work and when is the best time to lock. Here are a few reasons why you should do it now.
1. Rates are Low
The interest rate for a mortgage is the percentage of the money you borrow that you pay to the lender over time. Generally, the lower the rate, the better. However, it’s important to remember that rates can change on a daily basis and may go up as well as down.
This makes it difficult for borrowers to know if they are getting the best rate possible or if they’re overpaying for their mortgage. That’s why many borrowers choose to lock in their rates when they’re at their lowest, instead of waiting until they see a rate they like.
A rate lock freezes an interest rate for a specified period of time, so borrowers don’t have to worry about the mortgage rate climbing between the time they submit their loan application and when they close on their new home. This helps protect borrowers from having to pay higher interest rates that result in higher monthly payments and long-term costs.
Whether or not to lock in your mortgage rate is a personal decision that comes down to how much risk you’re comfortable taking. Every homebuyer’s situation is different, so it’s important to consider your own financial profile and the current market climate before making a decision.
As you decide to lock your mortgage rate, ask your lender about their policies regarding re-locking opportunities. Typically, they will offer the option to re-lock your rate if it falls after you’ve locked it in order to give you the chance to still save money on your mortgage.
It’s also helpful to understand what factors can affect your mortgage rates this week on a weekly and even daily basis. For example, mortgage rates tend to be more volatile on Wednesdays and Fridays when investors are reacting to the latest news about the economy and the Federal Reserve’s latest policy announcements. Additionally, the jobs report released by the Bureau of Labor Statistics can have an outsized effect on mortgage-backed securities. It’s important to check in with your lender and real estate agent regularly to keep abreast of the latest information about rates.
2. You’ll Save Money in the Long Run
The lower your mortgage rate, the less you pay over the life of your loan. And over 30 years, that can add up to thousands of dollars in savings. That’s why it’s important to do your homework and shop around for the best rate. You can do so by comparing mortgage rates offered by different lenders, including online lenders like SoFi, Rocket Mortgage and Ally Bank.
While it’s true that no one can accurately predict the direction of interest rates, if you know mortgage rates will likely continue to fall, it might be wise to lock in your rate as soon as possible. However, if you think mortgage rates will rise, it may be better to wait.
Mortgage experts say that if you’re confident in the home you want to purchase, and you are comfortable with the monthly payments you will be required to make based on current mortgage rates, it is worth locking in your rate. That’s because once your lender has received your application, pulled your credit report and issued a loan estimate, it’s not feasible to change the mortgage rate without incurring additional costs.
However, if you’re still shopping for a home, and you are concerned that mortgage rates might continue to drop, it may be a good idea to ask your lender if they offer a float-down option. This allows you to take advantage of a lower rate when it’s available, but the catch is that it usually comes with an extra fee, so you should always carefully weigh this option before making a decision.
It’s also worth noting that you may be able to obtain a bridge loan, which will allow you to borrow funds from the sale of your existing home while you wait for the mortgage proceeds from the sale of your new home. This can save you the costs of a rate lock, and it’s especially recommended if you need to close on your home purchase quickly due to construction delays caused by labor shortages or supply-chain issues. However, if you are certain that you will be moving into your new home within a few weeks of closing on your existing one, it may be more cost-effective to simply lock in your mortgage rate.
3. You’re Protected
Mortgage rates are affected by many factors that change on a daily basis, including the stock market, the Federal Reserve, international events and inflation. By locking in your rate, you can protect yourself against any interest rate hikes that may occur between the time you’re pre-approved for your mortgage and closing on your loan.
By locking in your rate, you can avoid the hassle and expense of re-starting your mortgage process with another lender and potentially delay your closing. This is especially important if you’re already close to your closing deadline, like if you’re purchasing a new home and have a seller with a set sale date.
You can still switch lenders if you want to, but it will require extra paperwork and fees. Additionally, you’ll likely lose any money you paid toward an appraisal or credit checks with the first lender. If you’re able to save thousands of dollars by switching lenders, the cost of all those extra fees might be worth it.
If you’re not sure whether a mortgage rate lock is right for you, talk with your lender or a mortgage advisor to discuss your options. They can give you a quote for your rate and help you understand the terms of your mortgage rate lock.
When rates go up, your monthly mortgage payment will also go up. This is why it’s often smart to take the time to lock in a mortgage rate that fits within your budget.
No one can predict where mortgage rates will be headed in the next week or month, so it’s important to act sooner rather than later to ensure you don’t miss out on a low mortgage rate. By deciding to lock in your mortgage rate, you’ll eliminate uncertainty and save thousands of dollars over the life of your mortgage.
4. You Can Change Your Mind
One of the most difficult aspects of mortgage shopping is figuring out when the right time to lock in your rate is. There’s no one-size-fits-all answer to this question, as it will ultimately depend on the markets, your unique circumstances and how comfortable you are with taking risks. However, there are some guidelines to consider.
First, it’s important to understand that mortgage rates are volatile and subject to fluctuations from day to day. This means that if you decide to wait to lock in your rate, there’s no guarantee that mortgage rates won’t rise and make the monthly payment unaffordable. If this is the case, you’ll need to weigh whether the costs of reapplying for pre-approval and resubmitting all the necessary documentation for your loan is worth the risk that rates will fall once again.
Second, many lenders offer a “float-down option” to protect their borrowers from this type of scenario. With a float-down, you can choose to pay a fee, typically 0.5% to 1% of the loan amount, in exchange for the ability to lower your rate to current market rates once your rate lock period expires. This will not only save you money, but will also give you the peace of mind that comes from knowing your mortgage rate won’t rise to an unmanageable level.
If you decide to go with a lender that doesn’t offer this type of protection, you may want to consider switching lenders. It’s typically possible to switch mortgage lenders after a rate lock has begun, though you’ll need to verify that it will be possible to do so and get the new mortgage loan documents ready.
If you’re not sure whether to lock in your mortgage rate, talk with a mortgage banker and be honest about the type of risk you’re comfortable taking. They will be able to help you understand your options and make the best decision for your unique situation. And if you decide to lock in your mortgage rate, be sure to get it in writing so that there’s no confusion. Rate lock periods typically last from 15 – 60 days.
Conclusion
As an AI language model, I don’t have access to real-time financial data or market predictions, so I can’t confirm whether it’s advisable to lock in your mortgage rates this week. However, here are some reasons why you may want to consider locking in your mortgage rates:
- Protect yourself from future rate increases: If mortgage rates are trending higher, locking in your rate can protect you from any future rate increases. This can help you budget for your monthly payments and avoid any surprises down the road.
- Secure a favorable rate: If you’re happy with the rate you’re offered, locking it in can ensure that you’ll get that rate, even if rates rise in the future.
- Avoid missing out on a good rate: If rates are volatile and subject to frequent fluctuations, locking in your rate can help you avoid missing out on a good rate if it’s only available for a short period of time.
- Provide peace of mind: Locking in your rate can provide peace of mind and eliminate any uncertainty or anxiety about potential rate increases.
Here are some FAQs related to locking in mortgage rates:
- How long can I lock in my rate for?
The length of time that you can lock in your rate for will depend on the lender and the type of mortgage you’re applying for. Generally, rate locks can range from 30 days to 90 days or more.
- Is there a fee to lock in my rate?
Some lenders may charge a fee to lock in your rate. Be sure to ask your lender about any fees associated with rate locks.
- Can I change my mind after locking in my rate?
Once you’ve locked in your rate, you’re committed to that rate for the duration of the lock period. However, some lenders may allow you to renegotiate your rate if market conditions change significantly.
- What happens if rates drop after I lock in my rate?
If rates drop after you’ve locked in your rate, you’ll still be committed to the higher rate. However, some lenders may allow you to renegotiate your rate if rates drop significantly.
In summary, locking in your mortgage rate can protect you from future rate increases, secure a favorable rate, avoid missing out on a good rate, and provide peace of mind. Be sure to consult with your lender to determine the best course of action for your specific financial situation.
