Rate Lock
Also known as: Mortgage Rate Lock, Interest Rate Lock
An agreement with your lender that guarantees a specific interest rate for a set period of time, protecting you from rate increases during the time between loan application and closing.
Detailed Explanation
A rate lock freezes your interest rate for a specified period — typically 30, 45, 60, or 90 days. During this time, even if market rates go up, your locked rate stays the same.
In new construction, rate locks are tricky because the time from contract signing to closing can be 6 to 12 months or more. Standard rate locks are too short for this timeline.
Extended rate locks (6 to 12 months) are available but cost more. Builder preferred lenders sometimes offer extended rate locks as an incentive. Float-down options allow you to take advantage of lower rates if they drop during your lock period.
In Your Contract
Rate locks are part of your mortgage agreement, not the purchase agreement. However, the builder contract's closing timeline directly affects your rate lock strategy.
Key Points
- 1Guarantees your interest rate for a set period.
- 2Standard locks are 30-90 days — too short for most new construction.
- 3Extended locks are available but cost more.
- 4If your lock expires before closing, you may face a higher rate.
- 5Builder lenders sometimes offer extended rate locks as incentives.
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