Mortgage Rate Lock Explained - Secure Your Savings

A mortgage rate lock is a lender’s guarantee that your interest rate won’t change for a specific period, typically 30-60 days. Once locked, your rate stays the same even if market rates rise. Rate locks are free or low-cost for standard periods (30-45 days), with longer locks costing 0.125-0.25% more. Lock when you have a signed purchase contract and are comfortable with the current rate.

How Rate Locks Work

The Basic Concept

When you lock your rate:

Lender commits to a specific interest rate
Rate is guaranteed for a set period (lock period)
Market rate changes don’t affect your locked rate
You close at the locked rate (assuming timely closing)

What Gets Locked

Typically locked:

Interest rate
Points (discount or origination)
Some fees

Not locked:

Third-party fees (appraisal, title)
Prepaid items (taxes, insurance)
Rate lock itself may have conditions

Lock Periods

Lock Period	Typical Cost	Best For
30 days	Standard (no extra cost)	Quick closings
45 days	Standard or slight premium	Most purchases
60 days	0.125% higher rate	Extended timelines
90+ days	0.25%+ higher rate	New construction

Longer locks cost more because the lender takes more risk.

When to Lock Your Rate

Ideal Timing

Lock when:

You have a signed purchase contract
You’re comfortable with current rates
Your closing date is within the lock period
You’ve compared lenders and chosen one

Don’t lock:

Before you have a property under contract (risky)
If you expect rates to drop significantly
If your closing timeline is uncertain

The Rate Lock Decision

Lock now if:

Rates are favorable compared to recent history
You’re risk-averse and want certainty
Economic news suggests rates may rise
You can close within the lock period

Consider floating if:

You believe rates will drop
You can handle potential rate increases
Your timeline is flexible
You’re comfortable with market risk

Lock vs Float: The Decision

Locking

Pros:

Rate certainty
Protected from rate increases
Easier budgeting
Peace of mind

Cons:

Miss out if rates drop
Stuck with higher rate if market falls
Extension costs if closing delayed

Floating

Pros:

Benefit if rates drop
Flexibility
No commitment

Cons:

Risk of rate increases
Uncertainty about final payment
Potential stress from rate watching

Real-World Example

Marcus was buying a home in March. Rates were 6.5%, but economic reports suggested they might drop.

If he locked at 6.5%: Rate was guaranteed. If rates rose to 7%, he’d be protected. If rates dropped to 6%, he’d pay 6.5% anyway.

If he floated: He waited. Rates dropped to 6.25% two weeks later and he locked then—saving $57/month on his $350,000 loan.

The risk: If rates had risen to 7% instead, floating would have cost him $117/month more.

What Happens If Rates Drop After Locking?

Standard Lock: You’re Stuck

With a standard lock, if rates drop after you lock, you don’t benefit. You close at your locked rate.

Float-Down Option

Some lenders offer float-down provisions:

If rates drop by a certain amount (usually 0.25-0.5%), you get the lower rate
Costs extra (0.125-0.25% added to rate or upfront fee)
May have specific conditions

Example float-down:

Locked at 6.75%
Rates drop to 6.25%
Float-down triggers at 0.5% drop
New rate: 6.25% (minus any float-down fee)

Renegotiation

If rates drop significantly:

Ask lender if they’ll renegotiate
Be prepared for them to say no
Consider if breaking lock and restarting makes sense

Caution: Breaking a lock may have penalties and restarts the process.

What Happens If You Miss Your Lock Deadline?

Lock Extensions

If closing is delayed, you can extend your lock:

Short extensions (7-15 days): 0.125-0.25% fee
Longer extensions: Higher fees
Some lenders offer one free extension

Rate Renegotiation

If your lock expires:

You may need to lock again at current market rates
If rates rose, you pay more
If rates dropped, you may benefit

Planning for Delays

To avoid extension issues:

Choose a lock period with buffer room
Respond quickly to lender requests
Stay in communication about closing timeline
Build in extra time for potential issues

Lock Costs and Fees

Standard Lock (No Extra Cost)

Most lenders include 30-45 day locks at the quoted rate with no additional fee.

Extended Lock Premiums

Lock Period	Typical Premium
30-45 days	$0
60 days	0.125% of loan
75 days	0.1875% of loan
90 days	0.25% of loan
120+ days	0.375%+ of loan

On a $350,000 loan:

60-day lock premium: $437
90-day lock premium: $875

Extension Costs

If you need to extend an existing lock:

7-day extension: 0.125% typically
15-day extension: 0.25% typically

Rate Lock Strategies

Lock Early on Purchase Contracts

Once you have a signed contract, lock if you’re happy with the rate. Waiting adds risk.

Match Lock to Realistic Timeline

For typical purchase: 45-day lock (30 days is often cutting it close)

For new construction: 90-180 day lock (or builder rate lock program)

For quick close: 30-day lock may suffice

Consider Float-Down for Uncertain Markets

If you think rates might drop but want protection against increases, float-down gives you both—for a price.

Rate Shopping Before Locking

Get quotes from multiple lenders before locking. Once you lock, you’re committed to that lender (practically speaking).

New Construction Rate Locks

Extended Locks Needed

New construction often takes 4-12 months. Standard 30-60 day locks don’t work.

Builder Rate Lock Programs

Many builders partner with lenders to offer:

Extended locks (6-12 months)
Rate protection programs
Float-down options built in

Cost of Long Locks

Expect to pay significantly more for long locks:

6-month lock: 0.5-1% premium
12-month lock: 1-1.5% premium

Alternatives

Wait to lock: Lock 45-60 days before completion (risky but cheaper)

Forward commitment: Some lenders offer forward rate locks for new construction

Understanding Rate Lock Agreements

What to Review

Lock period: Start and end dates

Rate and points: Exact rate and any points included

Float-down terms: If available, what triggers it

Extension policy: Cost and availability of extensions

Expiration consequences: What happens if lock expires

Get It in Writing

Always receive written confirmation of your lock including:

Locked rate
Points
Lock expiration date
Any conditions

Verbal locks are unreliable. Email or written confirmation is essential.

Rate Lock FAQ

When should I lock my mortgage rate?

Lock when you have a purchase contract and are comfortable with the rate. Don’t lock before having a property under contract unless refinance.

How long should my rate lock be?

45 days for most purchases, 30 days for quick closes, 60+ days for complex situations. Add buffer time—closings often take longer than expected.

Can I change lenders after locking?

Technically yes, but you’ll lose any lock fees paid and start over with a new lender. Only switch if the savings significantly outweigh the hassle and costs.

What’s a float-down option?

It lets you benefit from rate drops after locking. If rates fall by a certain amount, you get the lower rate. It costs extra but provides protection in falling-rate environments.

Is there a fee to lock a rate?

Standard 30-45 day locks are usually free. Extended locks (60+ days) typically cost 0.125-0.25% of the loan amount.

What happens if I don’t close before my lock expires?

You’ll need to extend the lock (for a fee) or relock at current market rates. If rates rose, you’ll pay more.

Can I lock a rate before getting pre-approved?

Generally no. You need to be at least pre-approval and, for purchases, have a signed contract before most lenders will lock.

Learn when and how to lock in your mortgage rate