What is a "rate lock period"?

Lock It In

A rate "lock" or "commitment" is a lender's promise to set a particular interest rate and a certain number of points for you for a specified period during your application process. This prevents you from getting through your whole application process and finding out at the end that your interest rate has gotten higher.

Although there are several lengths of rate lock periods (from 15 to 60 days), the longer ones are generally more expensive. The lender can agree to hold an interest rate and points for a longer period, such as sixty days, but in exchange, the rate (and sometimes points) will be more than with a rate lock of a shorter period.

Other Interest Saving Strategies

There are more ways to get a reduced rate, in addition to going with a shorter rate lock period. A larger down payment will result in a reduced interest rate, because you will have a good deal of equity from the beginning. You can pay points to reduce your interest rate for the life of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to bring the rate down over the term of the loan. You'll pay more up front, but you will save money, especially if you keep the loan for the full term.

At James M. Dix, we answer questions about this process every day. Call us at (317) 288-9434.

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