VACAVILLE, CA, Mar 29, 2024—Due to constantly fluctuating interest rates, many homebuyers choose to lock in an interest rate at the inception of their home loan. Below, Stephen Spencer, Bev Dorsett & Sue and Steve Kappel, Broker/Owners of Coldwell Banker - Kappel Gateway 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 Sue and Steve Kappel. 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 Sue and Steve Kappel. “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 Sue and Steve Kappel.
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 Coldwell Banker - Kappel Gateway at info@kappelgateway.com, 707-427-5344, or Coldwell Banker - Kappel Gateway.