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Lock-In
What Is Lock-In?
A lock-in (or rate lock) is an agreement between a borrower and lender that guarantees a specific interest rate for a set period during the loan application process, typically for a mortgage.
Why It Matters
Locking in an interest rate protects borrowers from rate increases while their loan is being processed. It provides certainty in monthly payments and total loan cost.
How Lock-In Works
The process typically includes:
- borrower applies for a loan
- lender offers a rate lock option
- borrower locks in the interest rate
- lock period lasts for a defined timeframe (e.g., 30–60 days)
- loan must close within that period
Some locks may include fees or conditions.
Example
A borrower locks in a 6.5% mortgage rate for 45 days while completing the home purchase process.
Lock-In vs Floating Rate
- Lock-in secures a fixed rate temporarily.
- Floating rate allows the rate to change with market conditions.
FAQs About Lock-In
Can a rate lock expire?
Yes, if the loan does not close in time.
Can you extend a lock?
Often, for an additional cost.
Is locking a rate always beneficial?
It depends on market conditions.
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