Rate Lock
A rate lock is a lender's guarantee to hold a specific interest rate for a set period—typically 30, 45, or 60 days—while your loan is in process. If market rates rise before you close, your locked rate is protected. If rates fall, you're stuck with the higher rate unless you have a float-down option.
Rate locks are critical in volatile interest rate environments. If you lock at 7.0% on a $400,000 loan and rates rise to 7.5% before closing, you save approximately $133/month—over $47,800 over 30 years. If you don't lock and rates rise, you close at the higher rate.
Lock periods vary: 30-day locks are cheapest (lender takes less rate risk). 45 and 60-day locks cost slightly more or come with a slightly higher rate. Extended locks (90+ days) for new construction can cost 0.25–0.50% of the loan amount. Some lenders charge a lock fee upfront; others build it into the rate.
A float-down option lets you benefit if rates drop significantly after locking—typically requiring a drop of 0.25–0.50% before it kicks in. Float-downs cost extra (often 0.25–0.50% of the loan). If closing is delayed beyond your lock period, you'll need to extend the lock at additional cost, or let it expire and re-lock at current rates. Communicate closely with your lender and real estate agent to avoid lock extensions.
Key Takeaway
A rate lock is a lender's guarantee to hold a specific interest rate for a set period—typically 30, 45, or 60 days—while your loan is in process. If market rates rise before you close, your locked rate is protected. If rates fall, you're stuck with the higher rate unless you have a float-down option.
Related Terms
Frequently Asked Questions
Lock when you're comfortable with the rate and confident your closing will happen within the lock period. Don't wait until the last minute—locks need to be in place before closing. Discuss timing with your loan officer.
You'll need to pay for a lock extension (typically 0.25% of the loan per 15 days, or $875 on a $350,000 loan). Avoid this by choosing an adequate initial lock period and staying on top of closing timelines.
Only if your lock includes a float-down option. Without one, your locked rate is your rate. If rates drop significantly, you could let your lock expire and re-lock at the lower rate—but you risk rates rising again.
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