What is a Rate Lock?

I’m kicking off a series of mortgage minutes detailing different parts of the loan or loan process. Today’s topic is rate locks. Rate locks are in reference to the interest rate on your mortgage. A rate lock, or locking your rate, uses the current day’s interest rate to secure your loan. That means your interest rate will not change based on market conditions. This protects you, the client from rising rates if the market shifts… and it has been shifting like crazy recently.

Rate locks can usually be done in increments of 15 days, running from 15 days to 360 days, depending on the loan type you are getting. Is it a purchase or refi construction, renovation and so on. The other thing here is at Movement we have a little bit of an unusual rate lock system. We allow clients to lock in smaller slices, so, instead of having a 15, 30, 45-day, so on, we do 37-day, 20-day, 17-day, etc. So you can take advantage of a better rate in a smaller slice.

One thing that happens when you lock your rate is, if rates go up, you are protected. And that’s actually great. You are not going to be subject to interest rate gyrations, as I said earlier. The other thing that happens is there are other instances that can change your interest rate and they are not market-related. If you do have questions on those, let me know.