When buying a house, many people want to be able to take advantage of low interest rates as much as possible. It’s quite difficult to get the timing down right, but locking in a low interest rate could make a difference on how much money you’ll pay in the future. Timing is a difficult issue to deal with. Wait too long and the interest rates may rice. Lock the interest rate too soon and you may end up regretting it if the interest rates go down tomorrow. It’s really not an exact science. It’s more of a gamble. Here are a few things you should consider when thinking about locking in an interest rate:
1. How long is the loan lock period? – It’s only reasonable to assume that you can’t lock in the loan period for as long as you want. That is, you can’t lock it for as long as you want without having to pay a premium for it. Depending on the lender, a 30-day loan lock could cost half a point, and a 60-day loan lock could cost a point. The fee is only paid if you decide to go through with the loan, though, and it’s paid during closing. Usually you can also opt to have the loan lock fee computed into the rate if you can’t pay it upfront.
This is an important piece of information that you should not forget. Getting a loan rate locked doesn’t mean that you can’t back out and choose a different lender. If you decide that the locked rate is not good and you want to switch to a different lender because you’ll get a better rate at the time that’s closer to the projected purchase of the house, then you don’t have to pay the loan lock fee. Most lenders would even consider renegotiating the loan lock because they want to keep their customers happy.
2. When should you lock the loan rate? – Since rates can change every day (actually, they can change every hour or even shorter), there’s really no way to know how the rates would fluctuate. Generally, the rule of thumb is that if you’re already happy with the interest rate you locked in, go with it. If it’s something you can work with monthly, then you should lock it in. Don’t feel too bad if it goes down after you lock it in because it could as easily have gone up. As long as you can work with it, it should be good. If for example you have been looking at South Charlotte homes for sale and while negotiating for a piece of South Charlotte real estate that you decide to buy, you find that the rates are lower than what you’re hoping for, then go for it!
3. Are there any negative aspects of locking in an interest rate? – Not really. Unless you look at the trend of interest rates and you locked it while at a high point which you know you can’t afford. Locking it in would protect you from the volatility of the rates and give you some measure of peace of mind while you’re working to close the purchase of your new house.