When to Lock In My Mortgage Rate | Chase (2024)

FAQs

When to Lock In My Mortgage Rate | Chase? ›

You can choose to lock in your mortgage rate from the moment you select a mortgage, up to five days before closing. Locking in early can help you get what you were budgeting for from the start. As long as you close before your rate lock expires, any increase in rates won't affect you.

The sweet spot to lock is the optimal mix of the interest rate, term and costs. Most lenders won't lock your rate for less than 30 days unless you're ready to close, and often offer the same rate for a 15-day and 45-day period.

Given the potential for even lower rates, it can make sense to take a shorter term fixed rate, such as a 3 year fixed rate, instead of a 5 year fixed rate. This is because you would renew sooner (ie. 2 years sooner) at a lower rate, while also protecting yourself from higher variable rates in 2024.

Many borrowers want to lock in an interest rate on their permanent loan. In many instances this is possible as early as nine months prior to project completion. Your banker will spend time talking about long term rate lock options and what may make the most sense for you.

Some lenders may allow you to lock in the rate once you're preapproved, while others might require that the seller first accepts your offer. Rate lock policies vary by lender, but usually, a loan advisor will offer you one once your application is approved and ready to go to underwriting.

If interest rates go up after you've locked in your rate, you get to keep the lower rate. On the other hand, if you lock your rate and interest rates fall, you can't take advantage of the lower rate unless your rate lock includes a float-down option.

If you think rates are likely to stay the same or increase, you might be better off locking. But again, no one ever really knows for certain what the rates will do, so you must be willing to accept the risk if you choose to float. If uncertainty keeps you up at night, locking is definitely the better option.

The vast majority of lenders let you lock in a new mortgage deal up to six months before you need it to start. So in August even if your deal expires in December, you could lock in August's rate for the future while continuing to the end of your current deal. If rates rise, you've a cheaper deal locked in.

The Federal Reserve has indicated it may cut rates later in 2024. Certified financial planner Amy Hubble told CNBC Select she doesn't expect a rate cut until at least September.

The 5 year rule for home ownership refers to the requirement that individuals must have owned and used their home as their primary residence for at least 5 consecutive years out of the last 8 years in order to qualify for certain tax benefits, such as the capital gains exclusion.

What is the downside of a rate lock to the borrower? ›

Missed opportunities: If market rates drop after you've locked in your rate, you miss out on the lower rates. Unfortunately, you'll pay more in interest over the loan term. Fees and costs: Some lenders charge for a rate lock, particularly if you want to do so for an extended period.

There is the potential for significant cost savings by going with a variable rate, as you are more likely to save on interest-carrying costs over the long term. There is also the additional benefit of locking your mortgage into a fixed rate at any time, like if interest rates start to increase as an early renewal.

Monday is the best day to lock-in mortgage rates; Wednesdays are risky. Mortgage rates are in constant flux, even changing multiple times a day. This volatility can make it challenging to know when to lock in your rate.

Technically, you can lock in the mortgage rate at any time after you've been approved for the home loan and up to five days before closing. According to the Consumer Financial Protection Bureau (CFPB), mortgage rate locks are most commonly offered for 30, 45 and 60 days.

You can't unlock your mortgage rate after locking. But there may be other ways to get a lower rate after you've locked. However, the agreement works both ways. If rates suddenly fall, you can't just back out of the rate lock and expect your lender to offer you a lower interest rate.

The ideal time to lock your mortgage rate is when interest rates are at their lowest, but this is hard to predict — even for the experts. It's worth noting that interest rates could decrease during your lock period. Should this happen, you'll most likely have to pay the rate you initially locked in.

A float down option is a provision extended by your loan officer that will allow you to drop your locked-in rate to the current mortgage rate before your closing date. While most lenders won't charge you a lock fee, there is an additional fee for a float down option, but it's often added to your closing costs.

As the lender already has your application, it's no longer considered new business. If the rate drops after your approved, then you're would not be eligible for the lower rate.

Locking in now could mean you're stuck with a high home loan interest rate for years to come, and your mortgage repayment will increase monthly. Important: If you do decide to fix your loan, it should only be for two years maximum since home loan rates are expected to go down in 2024 and 2025.

Generally, once you've locked in a mortgage rate, the terms are fixed and usually cannot be renegotiated. However, some lenders offer a float down option, allowing you to negotiate mortgage rates if market conditions shift favorably during the rate lock-in period.

How much is the fee to lock in a mortgage rate? ›

The charge for a rate lock could range from 0.25% to 0.5% of the amount of your mortgage. For example, on a mortgage loan of $450,000, a 0.25% rate lock deposit would be $1,125.

Disadvantages of Locking Your Rate Early

The longer you want to lock your rate, the more it will cost. Rates may decrease before you close on your loan, in which case you are stuck with the higher rate you locked in, unless you paid for a rate lock that will float down to the lower rate.

But that doesn't mean you have to follow through with that loan! You can switch mortgage lenders after a rate lock. After a rate lock, switching mortgage lenders is the only way to change your rate.

If your interest rate is locked, your rate won't change between when you get the rate lock and closing, as long as you close within the specified time frame and there are no changes to your application. Rate locks are typically available for 30, 45, or 60 days, and sometimes longer.

You are not committed to borrowing from a specific lender until you sign closing documents and receive the funds.

Thirty-year fixed-rate mortgages are standard in the U.S., allowing homeowners south of the border the option to lock in the interest rate on their mortgage for a full 30-year term. And while some Canadian lenders do offer fixed-rate terms for as long as 25 years, they come at a much higher interest rate.

While you can technically lock your rate in with multiple lenders, doing so implies you're committing to the loan application process with that lender. Locking your rate could also trigger a credit check and sometimes other fees, which you might still be responsible for even if you decide to work with another lender.