Should I Lock My Mortgage Rate? Pros, Cons, and Tips

Choosing whether to lock in your mortgage rate or let it float can feel like a high-stakes decision. Both strategies have their merits, and understanding when to use each can help you make the best choice for your financial situation. Here’s a balanced look at your options:

1. The Benefits of a Rate Lock

• Stability: Locking your rate when you have a contract on a house or during refinancing protects you from sudden increases in interest rates, ensuring that your rate stays the same despite market fluctuations.

• Peace of Mind: Many borrowers prefer the certainty of knowing what their interest rate will be.

2. Not Locking or Floating Your Rate

• Potential for Lower Rates: If rates drop before closing, floating your rate at application could result in a lower interest rate. This option is akin to playing the market, which can be risky but potentially rewarding.

• Risk vs. Reward: Floating your rate is best if you can afford to take on some risk and possibly capitalize on falling rates, but it can be painful if it goes the wrong way. It's essential to stay informed about market trends and economic indicators that might impact rates.

3. Rate Lock Periods and Costs

• Lock Periods: The length of your rate lock can impact your rate and fees. A shorter lock period can mean lower costs if the lender can process your loan quickly.

• Lender Efficiency: Ensure that the lender you choose can realistically close your loan within the rate lock period to avoid the need for costly extensions.

Conclusion:

Deciding whether to lock in your mortgage rate or let it float is a significant decision that can impact your financial future. With a clear understanding of the pros and cons of each option, you can be better positioned to make an informed choice.

Looking for expert guidance on your mortgage rate options? We’ve advised thousands of clients on their rate locks. We'll walk you through the entire process, leveraging our experience to ensure you make the best decision.

Book an Appointment to discuss rate locks with us in depth.