When you apply for a mortgage, you will be quoted a rate, but that rate is for that day only. Usually, you don?t close on the exact day you are asking about rates, so you will have to take a chance that the rate will go up.
In reaction to this problem, many banks offer to lock in a rate for a certain length of time. They realize that it may take some time before your house is chosen and actually closed on. Many people use the interest rate when they calculate how much their monthly mortgage costs will be. So a lock in period can be negotiated with the lender, which will keep the rate the same for a certain length of time. You should be able to lock in either or both points and rates.
The lock in rate can be fixed at the application stage, the processing stage or the approval stage of the home loan.
An example would be if a bank offered a lock in rate for thirty days at 5.5% interest with one point. What this gives you is the privilege to keep that rate, even if you do not close on the loan for another 30 days. This thirty day period is the norm, since getting all the paperwork done may take that long. However, if you prefer a longer period, you may have to pay since banks do not want to take such a risk for an extended time without getting something in return.
Remember that the lock in period can go against you if rates go down instead of up, unless your agreement permits you to get out of the agreement. Make sure your lender is willing to switch to the lower rate in case of lower interest rates.
If your mortgage is not settled during the lock in period, it will expire and your new mortgage or new lock in period will be at the higher rate. If rates have not moved, you may be able to extend the lock in term.
There are also a great many combinations you can have.
Locked in Interest Rate with Locked in Points. The lender guarantees both the interest rate and the number of points for the lockin period.
Locked in Rate, floating points. The basic rate is fixed for the period, but the lender keeps the right to increase the points. You may have to pay more points to obtain the guaranteed rate.
In a volatile interest rate environment, it is very wise to choose a lock in period, and maybe even pay a slightly higher interest rate for a longer period. - 29971
In reaction to this problem, many banks offer to lock in a rate for a certain length of time. They realize that it may take some time before your house is chosen and actually closed on. Many people use the interest rate when they calculate how much their monthly mortgage costs will be. So a lock in period can be negotiated with the lender, which will keep the rate the same for a certain length of time. You should be able to lock in either or both points and rates.
The lock in rate can be fixed at the application stage, the processing stage or the approval stage of the home loan.
An example would be if a bank offered a lock in rate for thirty days at 5.5% interest with one point. What this gives you is the privilege to keep that rate, even if you do not close on the loan for another 30 days. This thirty day period is the norm, since getting all the paperwork done may take that long. However, if you prefer a longer period, you may have to pay since banks do not want to take such a risk for an extended time without getting something in return.
Remember that the lock in period can go against you if rates go down instead of up, unless your agreement permits you to get out of the agreement. Make sure your lender is willing to switch to the lower rate in case of lower interest rates.
If your mortgage is not settled during the lock in period, it will expire and your new mortgage or new lock in period will be at the higher rate. If rates have not moved, you may be able to extend the lock in term.
There are also a great many combinations you can have.
Locked in Interest Rate with Locked in Points. The lender guarantees both the interest rate and the number of points for the lockin period.
Locked in Rate, floating points. The basic rate is fixed for the period, but the lender keeps the right to increase the points. You may have to pay more points to obtain the guaranteed rate.
In a volatile interest rate environment, it is very wise to choose a lock in period, and maybe even pay a slightly higher interest rate for a longer period. - 29971
About the Author:
Thank you for reading this article.Start saving money oncheap life insurance canadaalso considerfree life insurance quotes canada
