What is a Mortgage Rate Lock?

mortgage rate lock

Confused about what a mortgage rate lock is? Lakeside Title is here to help! This blog will provide an overview of mortgage rate locks as well as the potential risks associated with them.

Mortgage Rate Lock Defined


A mortgage rate lock is when a borrower and a lender agree to establish a lock in the mortgage interest rate, meaning that the interest rate won’t change between the offer and closing. This lock will last over the course of a certain period of time at the current average interest rate in the economy.

If a borrower chooses to lock in a mortgage rate, this agreement should be binding for both the lender and borrower. Thereafter, the mortgage rate will remain locked from the offer of the loan, until the deal is closed. This rate will remain the same, despite any changes in the current average mortgage interest rate. However, this is on the condition that there are no changes to the loan application during the closing process. If any changes occur to the borrower’s credit score, income, or the loan amount, the interest rate will be affected. Moreover, if the home appraisal is lower or higher than originally thought, or the borrower decides to change the requested type of mortgage, the interest rate will also be affected.

The Lock Fee


With a mortgage rate lock agreement, a lender has the power to charge a lock fee. This is a fee that the borrower will have to pay in the event that he or she chooses to lock in the interest rate. On the other hand, the lender may choose to offer a higher interest rate than the prevailing interest rate to protect themselves in case the borrower decides not to lock-in the interest rate.

The Risks of a Mortgage Rate Lock


There are a couple of risks that a borrower and lender would have to be willing to take before accepting a mortgage rate lock agreement:

  1. If lower mortgage rates become present during the mortgage rate lock time period, the borrower would not be able to take advantage of them. On the contrary, if mortgage rates become higher, the mortgage lender would not be able to take advantage of them.
  2. Borrowers may choose to back out of a mortgage rate lock agreement if the interest rates become lower.
  3. Lenders may allow lock periods to expire if the interest rates become higher, using the excuse that the borrower was taking to long to submit the appropriate paperwork.


Lakeside Title Is Here to Serve You!

Lakeside Title provides title insurance and numerous title-related services, all while making sure your transactions and funds are protected and secure. Our processes streamline residential and commercial real estate transactions for lenders, realtors, buyers, and sellers. To learn more, give us a call at 410-992-1070. We look forward to the chance to serve you!

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