"Rate Lock" and other Ways to Get a Lower Interest Rate
Freezing the Rate
When you're offered a "rate lock" from the lender, it means that you are guaranteed to keep a particular interest rate for a determined period for your application process. This means your interest rate can't get higher as you are going through the application process.
Although there can be a choice of rate lock periods (from 15 to 60 days), the longer ones are typically more expensive. A lending institution can agree to lock in an interest rate and points for a longer period, such as sixty days, but in exchange, the rate (and sometimes points) will be higher than with a rate lock of a shorter period.
More Ways to Get a Great Interest Rate
There are other ways to get a reduced rate, besides opting for a shorter rate lock period. The bigger down payment you can make, the smaller your interest rate will be, since you will be starting with more equity. You can pay points to bring down your interest rate over the term of the loan, meaning you pay more initially. One strategy that makes financial sense for many people is to pay points to reduce the rate over the term of the loan. You'll pay more initially, but you'll save money in the end.
At Executive Lending Group, LLC, we answer questions about this process every day. Call us at (816) 525-8000.
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