You're getting ready to close and you're wondering, "Should I lock my rate?" If you are happy with your current interest rate and feel that it is low, then you may want to lock it and not worry about fluctuating rates on the open market. If you would like the interest rate to be lower, and feel that if you wait interest rates may decrease, then you can hold off or ask for a long-term, float-down option rate lock. Although a possibility, long-term rate lock opens the possibility of the rate increasing while you're waiting for a decrease, and often times come with fees.

What is a Mortgage Rate Lock?

A rate lock guarantees you that the mortgage's interest will not climb past a certain rate if the loan is closed by deadline. For example, if you lock the rate at 6 percent 28 days before closing, and rates rise over the next month, your loan's rate will not change if you close on time. If you decided not to lock and the rates increased, you would end up paying the higher rate.

When locking, fees are common when the lock is secured beyond 30 days, and especially if it locked beyond 60 days. If the rate is locked before 30 days, in most cases you will not be charged a rate-lock-fee.

Long-term Mortgage Rate Locks

Many long-term locks, say a 180-day lock, offer a float-down option, which means that if rates have dropped while you're closing, you can secure the lower rate. Remember though, the interest rate is not yours until you've locked your rate. Mortgage rates change every day, sometimes more than once, and until you've told your lender to lock the rate on your loan, your interest rate will change daily too.

Written Confirmation for Mortgage Rate Lock

When you lock your rate make sure to get this confirmation in writing. The written confirmation should include the rate, the expiration date, and all terms and fees. This step is crucial and will eliminate any misunderstandings about your rate in the future.