How to Understand the Lock in Period for Your Mortgage
by Fern J. Lopez
When you are shopping for mortgage rates, you have to understand that the terms you are quoted are the terms in force at the time of the quote. Usually, you don’t close on the same day you are asking about rates, so you will have to take the risk that the rate will go up.
In reaction to this problem, many lenders offer to lock in a rate for a certain period of time. They know that the time between deciding to shop for a home and actually finding and closing on it may take a while. And since many people figure how much mortgage they can afford based the interest rate, they realize borrowers want to maintain that rate. So a lock in period can be negotiated with your lender, which will fix the rate for a certain period of time alberta mortgage rates. Either/or interest rates and points can be locked in.
Generally, lenders will offer this option at any point: application, during processing, or at approval.
Perhaps you have the opportunity to lock in 5.5% interest with one point for 30 days. You then have the right to borrow at 5.5% even if you are not going to close on the mortgage for the next thirty days. This is a normal lock in period, and a lot of lenders offer it to attract customers, and are willing to take the risk for a short period of time. Banks are not usually willing to give such a guarantee for greater than 30 days, with a greater chance of rates increasing, unless the borrower pays a premium.
Remember that the lock in period can go against you if rates go down instead of up, unless your agreement permits you to break the agreement calgary mortgage rates. This term is agreed upon when the lock in period is set.
After the 30 day period, naturally, the rate will revert to whatever the prevailing market rate is. The bank will usually permit you to extend the period, as long as there have not been wide movements in interest rates.
Lock in periods cover a number of mixtures of terms, as follows:
Rate is locked, points are locked. Both interest rate and number of points are guaranteed.
Locked in Rate, floating points. Here, the rate may be locked, but the lender gives himself some leeway by maintaining the privelege to change the points charged. The lender can charge additional points if they wish.
If interest rates are changing a great deal, it is probably a good idea to ask your banker about lock in periods.
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