How to Lock in Your Mortgage Rate
by Fern J. Lopez
When you apply for a home loan, you will be given a rate, but that rate is for that day only. Obviously, you will not be closing on your new house that same day, so you have to worry about what the rate will be at a later point.
Because of this concern by borrowers, most lenders now offer a lock in period, which means you can keep the quote you are given, for a while, anyway. They understand that there is inevitably a period of time between when the mortgage application is made and the loan can be settled alberta mortgages. Many people count on the interest rate when they figure how much their monthly mortgage costs will be. Most homeowners find it better to have a lock in period so they can count on their monthly mortgage payment calculation. You can lock in either or both points and rates.
The lock in rate may be fixed at the application point, the processing stage or the approval stage of the mortgage.
Let us say you are offered a 30 day lock in rate of 5.5% with one point edmonton mortgage rates. This means that even if rates go upincreased, if the borrower closed within that thirty day period, the rate would be 5.5 %. Thirty days are usual lock in periods, and are given as a marketing device since the bank usually has a small risk that rates will move dramatically during a short period. However, if you prefer a longer term, you may have to pay since banks do not want to take such a risk for an extended time without getting something in return.
This is a two way street, because if rates go down, you may want to cancel the loan, but the agreement must permit it. This has to be done when you sign up for the lock in rate.
Once the 30 day period is over, your agreement is over and you will be given whatever the new market rate is. If rates have not changed, a bank might consider issuing a new guarantee at the existing rate.
Lock in periods cover a few of mixtures of terms, as follows:
Locked in Interest Rate with Locked in Points. Both interest rate and number of points are guaranteed.
Locked in Rate, floating points. In this case, the rate may be locked, but the lender gives itself some leeway by maintaining the right to change the points charged. You may have to pay more points to get the guaranteed rate.
If you are in a period of extremely volatile interest rates, it could be well worth your while to have a lock in term, even if there is a charge for it.
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