To lock or not to lock: that is the question! When you lock in your mortgage rate, it’s guaranteed to stay the same until you close on your loan. This helps ensure a monthly payment you’re comfortable with. On the other hand, floating your rate means leaving it susceptible to the market changes until your loan closes.
Oftentimes, there’s more to consider when deciding whether to lock or float your rate.
When should I lock my mortgage rate?
Simply put, you should lock your mortgage rate when the market is unsteady or rates are rising. If your lender expects rates to climb before you want to close your home loan, they’ll suggest you lock your rate.
As of October 2018, Freddie Mac forecasts that mortgage rates will either hold steady or increase during the last months of this year. So, your lender may recommend that you lock your rate early within homebuying process.
What to expect when you lock your rate
A rate lock secures your interest rate for a set period of time (typically 30 or 45 days). Locking your rate has a few impacts beyond ensuring a set interest rate for that period. Typically, a rate lock requires that:
- You need to close your loan within the agreed-upon timeframe
- Your application stays the same, and there can’t be changes to the type of loan
- Extending the time period of your rate lock may mean higher fees
Is it possible for my locked rate to change?
Yes, but that’s always due to something changing within your loan file. If your credit score changed by a significant amount, or your home appraisal ended up drastically different than expected, your locked rate could change.
What’s a floating rate? Is there an advantage?
A floating rate is simply one that hasn’t been locked yet.
If rates are falling, it may be in your best interest to float your rate until your loan requires a decision. This leaves you susceptible to market changes. Your mortgage advisor deals with interest rate changes daily and will be able to make an educated recommendation for you.
Make the right call
Locking or floating your interest rates has big implications for your mortgage. Like many steps in the home loan process, you need a mortgage adviser you can trust to provide personalized advice.
Whether you need quick loan approval or you’re just considering a home in the future, our mortgage advisers are happy to talk with you.