Rate Lock Options

This term is easier to understand than you think. The bottom line is, you cannot close a mortgage loan without locking in an interest rate and a program. In essence, you are entering into a contract with Bell, to have your interest rate held for you for a period of time while you are waiting to close.

There are four components to a rate lock:

• Loan program
• Interest rate
• Points (if any)
• Length of the lock

The longer the length of the lock, the higher the points or the interest rate. This is because the longer the lock, the greater the risk for the rates to increase prior to closing.

For example you lock in a 30-year fixed loan at 7.0% for 0 points for 15 days on May 4. This lock will expire on May 19. Bell must disburse funds by May 19, otherwise your rate lock expires, and your original rate-lock commitment is invalid.

The same lock might cost 0.25 points for a 30-day lock or 0.50 points for a 60-day lock. If you need a longer lock and do not want to pay the higher points, you may instead pay a slightly higher rate.