"Rate Lock" and other Ways to Get a Lower Interest Rate
Locking in your Interest Rate
When you are offered a "rate lock" from a lender, it means that you are guaranteed to keep a specific interest rate for a determined period while you work on the application process. This ensures that your interest rate can't rise during the application process.
Rate lock periods can be various lengths of time, anywhere from fifteen to sixty days, with the longer ones typically costing more. The lender can agree to lock in an interest rate and points for a longer period, such as 60 days, but in exchange, the rate (and sometimes points) will be higher than that of a rate lock of a shorter period.
More Ways to Save on Interest
In addition to choosing a shorter lock period, there are several ways you are able to attain the best rate. A bigger down payment will result in a lower interest rate, because you will have more equity from the beginning. You could choose to pay points to lower your interest rate for 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 term of the loan. You'll pay more up front, but you'll come out ahead, especially if you keep the loan for a long time.
Family Mortgage Company of Hawaii, Inc. NMLS #244497 can walk you through the pitfalls of getting a mortgage. Call us at (808) 935-0678.
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