"Rate Lock" and other Ways to Get a Lower Interest Rate

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What is a Rate Lock?

A rate "lock" or "commitment" is a promise from the lender to set a certain interest rate and a specific number of points for you for a certain period during your application process. This protects you from working through your entire application process and finding out at the end that your interest rate has gone up.

Rate lock periods can vary in length, anywhere from 15 to 60 days, with the longer spans generally costing more. The lending institution will agree to freeze an interest rate and points for a longer period, such as 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

Other Ways to Save on Interest

There are more ways to get a good rate, besides agreeing to a shorter rate lock period. The more the down payment, the smaller your interest rate will be, since you will be entering the loan with more equity. You might choose to pay points to reduce your rate for the life of the loan, meaning you pay more up front. One strategy that is a good option for many people is to pay points to bring the rate down over the life of the loan. You'll pay more initially, but you'll save money, especially if you don't refinance early.

RPM Mortgage - Paul Schectman Senior Mortgage Advisor can walk you through the pitfalls of getting a mortgage. Call us: 415-381-7006.