Locking In Your Rate
Using a mortgage calculator such as those typically
found on many online websites can help consumers see
the importance of locking in their interest rate. If
you do not lock in your rate, it may go up before the
mortgage loan process is completed. A few percentage
points here or there might not seem like a big deal.
However, you can use a mortgage calculator to see the
long-term consequences of failing to lock in the best
rate when you have the chance.
Let’s look at an example. John Smith applies
for a mortgage loan in the amount of $100,000, with
a term of 30 years. He is quoted an interest rate of
6 percent. He does not enquire about locking in the
rate. By the time the mortgage loan process has completed,
including all the necessary paperwork and signatures,
the lending institution’s rate has gone up to
Using a mortgage calculator, John learns that with
the original rate of 6 percent his basic monthly payment
without taxes and insurance would be around $600. With
the new rate of 6.5 percent, the payment would be around
$630, or an additional $350 more annually.
Talk to your lender about locking in your rate. Will
they do it when the application is filed, or while the
loan is processed, or must you wait until after you
have been approved? Is there a fee, and what happens
to it if the loan fails to close? What happens if the
lending institution’s rate goes down rather than
up after you have locked in a rate?
Remember, you should not rely solely upon on verbal
assurances. Rather, it is well advised that you should
get any promise to lock-in a specific rate in written