What does the term “lock” mean?
When a lender “locks” the interest rate, a homebuyer is guaranteed a specific interest rate for a specific period of time. That period of time is called the lock period. Typical lock periods are 15, 30, 45 and 60 days. In a stable rate environment, shorter lock periods generally provide a better interest rate.
The lock guarantees the interest rate as long as the loan closes and funds prior to the expiration date of the chosen lock period. If a buyer’s closing is delayed beyond their lock expiration date and rates rise, the buyer may have to pay higher market rates. We usually advise our clients to lock for a period longer than is needed. In other words, lock for a period beyond the actual projected closing date. This will protect against any unforeseen circumstances that could delay the mortgage closing.