"Rate Lock" and other Ways to Get a Lower Interest Rate

Locking in your Interest Rate

A rate "lock" or "commitment" is a promise from the lender to hold a particular interest rate and a specific number of points for you for a specified period of time while your application is processed. This saves you from working through your whole application process and learning at the end that the interest rate has risen higher.

Rate lock periods can be various lengths of time, between fifteen to sixty days, with the longer ones typically costing more. The lending institution may agree to freeze an interest rate and points for a longer period, say 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

More Ways to Get a Great Interest Rate

In addition to opting for a shorter rate lock period, there are more ways you can get the best rate. The larger the down payment, the lower your rate will be, since you will be starting with more equity. You can pay points to reduce your interest rate over the term of the loan, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to reduce the interest rate over the life of the loan. You'll pay more initially, but you'll come out ahead, especially if you don't refinance early.

South County Mortgage can walk you through the pitfalls of getting a mortgage. Give us a call: (401) 583-4150.

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