How do I know when to lock?

June 2, 2020
Author: New England Home Mortgage

Everyone has to do it at some point!

Mortgage interest rates have moved quickly with the uncertainty surrounding COVID-19, oil wars, and stock market volatility. Like millions of homeowners, you’re probably hoping to save money by locking in the absolute lowest rate on your refinance. Let us help.

What is a Rate Lock?
Locking in a rate simply means setting the final interest rate for your mortgage loan.

How Long Does a Lock Last?

Rate locks vary but are usually made in increments of 5 or 10 days, ranging from 10 to 60 or more days. Longer locks are less likely to expire if your closing is delayed, but shorter locks may be less expensive.

Why Do Longer Locks Cost More?
When you lock your rate, we purchase insurance (a hedge) and register the lock with the end investor (usually Fannie Mae or Freddie Mac). Longer locks pose a greater risk for market changes, so the insurance is more expensive.

Locking In Is a Two-Way Street.
The lock protects you from rising rates, though you take the risk that prevailing rates might fall. On the other hand, we carry the risk of both rising rates and higher costs if the loan doesn’t close.

The Best Approach to Securing the Lowest Rate.
The lock you choose will depend on your scenario, including variables like the type of loan, complexity of qualification, credit requirements, and property type. When rates are rising, locking in will protect you. If rates are falling, then floating—or waiting to lock—may be better.

The Bottom Line.
Let’s discuss your loan and decide what’s best for you. We’ll devise the best approach based on all those variables and your own preferences.

Reach out, and we will be happy to discuss! 860.426.2447

(860) 736-2747
37 W. Center Street, Suite 208, Factory Square, Southington, CT. 06489