"Rate Lock" and other Ways to Get a Lower Interest Rate

What is a Rate Lock?

A rate "lock" or "commitment" is a lender's promise to freeze a specific interest rate and a particular number of points for you for a specified period of time while your application is processed. This keeps you from getting through your whole application process and learning at the end that your interest rate has gone up.

Rate lock periods can vary in length, anywhere from fifteen to sixty days, with the longer period generally costing more. The lending institution can agree to hold an interest rate and points for a longer span of time, such as sixty days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.

Additional Ways to Save on Interest

In addition to choosing the shorter lock period, there are more ways you can get the lowest rate. The larger down payment you make, the lower your rate will be, because you will be starting with more equity. You could choose to pay points to bring down your rate over the loan term, meaning you pay more up front. One strategy that makes financial sense for many people is to pay points to bring the rate down over the life of the loan. You'll pay more up front, but you will come out ahead in the end.

Atlantic Financial Services can answer questions about rate lock periods and many others. Call us: (732) 969-9300.

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