"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a lender's promise to lock in a certain interest rate and a certain number of points for you for a specified period while your application is processed. This protects you from going through your whole application process and learning at the end that the interest rate has risen higher.
Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer spans typically costing more. The lending institution will agree to hold an interest rate and points for a longer span of time, like sixty days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of fewer days.
Other Interest Saving Strategies
In addition to opting for a shorter lock period, there are several ways you may be able to score the best rate. The larger down payment you can make, the smaller your interest rate will be, because you will have more equity from the start. You may choose to pay points to bring down your 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 pay more initially, but you will come out ahead in the long run.
Harbor View Lending* a DBA of Megastar Financial can answer questions about rate lock periods & many others. Call us: (207) 571-8034.