BOULDER, CO, Mar 28, 2024—Due to constantly fluctuating interest rates, many homebuyers choose to lock in an interest rate at the inception of their home loan. Below, Phil Boren, Broker Associate of RE/MAX of Boulder, Inc. offers insights on the pros and cons of securing a locked rate.
“Locking in a mortgage rate with a lender protects you from the time your lock is confirmed to the day it expires,” says Boren. Because the interest-rate market fluctuates constantly and is subject to quick movements without notice, lock-ins make sense in a rapidly-rising rate environment or when borrowers expect rates to climb during the next 30 to 60 days, which is typically the amount of time a lock-in remains in effect.
“A lock-in given at the time of application is useful because it may take the lender several weeks to prepare a loan application,” says Boren. “These days, however, automated loan practices have cut the time quite a bit.”
Why opt out of a lock-in? Of course there is the obvious chance that rates could drop once you're locked in, meaning you could miss out on landing a lower rate. Also, lock-ins are not necessarily free. “Some lenders require you to pay a lock-in fee to guarantee both the rate and the terms,” says Boren.
If your lock-in expires before you close on the loan, most lenders will base the loan rate on current market interest rates and points.
Deciding whether or not to go for a lock-in will depend on current mortgage rates. If they're low, locking-in is likely a good idea. If they are high, it's a gamble: by locking in, you could risk losing a lower rate. If you don't lock in, you risk rates rising. The choice is yours.
For more real estate information, please contact RE/MAX of Boulder, Inc. at philboren@gmail.com, 303-441-5647, or RE/MAX of Boulder, Inc..
Phil Boren is a 26-year veteran real estate Broker and Realtor, specializing in consulting with buyers and sellers in Boulder, CO and along the Front Range of Northern Colorado. Held Real Estate Broker's license in Texas, California and Colorado; Managing Broker for over 200 agents and Brokers for Century 21 and RE/MAX franchises. Award-winning Realtor with experience in management, sales, marketing, relocation, appraisal, REO, BPO's, foreclosures, short sales; previously held the MAI designation from the Appraisal Institute. Experienced in both residential and commercial real estate and achieved the No. 14 individual ranking in the 5-state, Mt. States Region for RE/MAX International in 2001, based on sales volume. Received my BSBA in Finance and Real Estate from the University of Arkansas in Fayetteville, where he was a 4-year starter and 4-year football letterman for Hall-of-Fame coach, Lou Holtz.