Everybody wants to get the best value when locking in their mortgage rate. With some homework and luck, you too can lock in the lowest possible rate. Once your rate is locked in, even if interest rates rise, you will still pay the lower rate.
The best advice in this situation is: “Don’t wait for the perfect loan rate.” As time passes, your choices for mortgage options will continue slimming down. Suppose you notice a trend of declining mortgage rates and decide it’s not a good time to lock in your rate. That’s a risk. If the rates go back up, you will get stuck with higher rates and ultimately pay more over your loan term.
The key points to consider when locking in your loan rate are:
- Interest Rate
- Length of the Lock Period
Extended mortgage rate locks will require some sort of additional payment, as they are not free. There is also a chance for a slightly higher interest rate or for the points to be adjusted to incorporate the rate lock fee. The reason is simple: the lender is taking additional risks. If the mortgage rates go up during the transaction period, the lender could end up losing money, as the loan would fund at a rate that is lower than the market interest rate. Locking the rate allows the borrower to save money, therefore it is recommended by all real estate agents.
HOW ARE LOAN LOCK RATES FIGURED?
Mortgage options vary amongst lenders, but a 30-day mortgage rate lock will generally cost you half of a point. Moreover, 60-day mortgage rate lock may cost you a full point. Points are a percentage of the mortgage amount. A 0.5 percent rate lock on a $400,000 loan is $2,000. It is not an upfront fee and is paid at the time of closing. Moreover, if you don’t want to pay for the rate lock with points, the fee can be adjusted in your interest rate.
DISADVANTAGES OF LOCKING YOUR RATE?
There are hardly any reasons not to lock your rate. Interest rates change daily and this volatility can put you in hot water. Thus, the best decision is to lock your mortgage rate. Some buyers prefer to take every possible dime out of a loan rate quote. However, even that doesn’t work every time and you may still be stuck with higher rates.
Lastly, if the rate was good at the time it was locked some weeks ago, a drop of 10% of a point or so isn’t that bad. You don’t want to be the kind of borrower who gets the best rate deal, but is unable to close the house on time.
As rates are becoming more unstable and fluctuating frequently, don’t wait for the perfect loan rate. Take advantage of Lendova’s low rate with no origination fees and lock in your mortgage rate today. Apply now at: www.lendova.com