Mortgage Rate Lock Explained 2025: When to Lock Your Rate & How It Works

What Is a Mortgage Rate Lock?

A mortgage rate lock is a commitment from your lender to honor a specific interest rate for a predetermined period, typically while your loan application is being processed. Think of it as "freezing" your rate so it can't go up, even if market rates increase.

Rate locks protect borrowers from interest rate volatility during the loan process, which can take 30-45 days or longer. Without a rate lock, your rate could change daily based on market conditions.

How Mortgage Rate Locks Work

The Rate Lock Process

1. Application: You apply for a mortgage and receive a rate quote
2. Decision: You decide whether to lock the rate or float
3. Lock Agreement: Lender provides written confirmation of locked rate
4. Protection Period: Rate is guaranteed for the specified timeframe
5. Closing: You close at the locked rate (or better if rates dropped)

Rate Lock vs. Rate Float

When to Lock Your Mortgage Rate

✅ Lock Your Rate When:

• • You're satisfied with the rate: It fits your budget and goals
• • Rates are expected to rise: Economic indicators suggest increases
• • You have a signed contract: Purchase agreement or refinance decision made
• • Closing is 30-45 days away: Standard processing timeframe
• • You can't afford higher payments: Rate increases would hurt your budget

❌ Consider Floating When:

• • Rates are trending down: Market indicators suggest decreases
• • You're rate shopping: Still comparing multiple lenders
• • Closing is far away: More than 60 days out
• • You can afford higher rates: Budget has cushion for increases
• • Lock costs are high: Fees outweigh potential savings

Rate Lock Periods and Costs

Standard Lock Periods

Cost Example: $400,000 Loan

• • 60-day lock (0.25%): $1,000 fee
• • 90-day lock (0.375%): $1,500 fee
• • 120-day lock (0.5%): $2,000 fee

Types of Rate Locks

Standard Rate Lock

Basic protection that guarantees your rate won't increase. If rates drop, you typically don't benefit unless the lender offers a "float down" option.

Float Down Rate Lock

Allows you to lock your rate but also capture lower rates if they drop significantly (usually 0.25% or more). May cost extra but provides the best of both worlds.

One-Time Float Down

Gives you one opportunity to lower your locked rate if market rates drop. Typically costs 0.125% to 0.25% of the loan amount.

Extended Rate Lock

Longer protection periods (90+ days) for complex transactions like new construction. Costs more but necessary for longer closing timelines.

Rate Lock Strategies for Different Scenarios

Home Purchase

• • Lock after your offer is accepted
• • Choose a 45-day lock for standard closings
• • Consider 60+ days for complex transactions
• • Factor lock costs into your budget

Refinancing

• • Lock when you're ready to proceed
• • 30-day locks often sufficient
• • Compare break-even with lock costs
• • Consider float if rates are dropping

New Construction

• • Use extended locks (90-120 days)
• • Budget for higher lock costs
• • Consider builder incentives
• • Plan for potential delays

What Happens If Your Lock Expires?

Extension Options

If your closing is delayed, you may be able to extend your lock for an additional fee, typically 0.125% to 0.25% per 15-30 day extension.

Re-Lock at Current Rates

If extension isn't available or cost-effective, you'll need to lock at current market rates, which could be higher or lower than your original lock.

Lender Policies Vary

Some lenders offer automatic extensions for delays beyond your control, while others charge for any extension. Ask about policies upfront.

Rate Lock Red Flags to Avoid

Expert Tips for Rate Lock Success

Before Locking

• • Shop multiple lenders for best rates
• • Understand all costs and terms
• • Get lock agreement in writing
• • Confirm closing timeline

After Locking

• • Respond quickly to lender requests
• • Avoid major financial changes
• • Monitor lock expiration date
• • Communicate any potential delays

Rate Lock vs. Market Timing

While it's tempting to try timing the market perfectly, remember that:

• • Rate predictions are often wrong
• • A good rate today beats a perfect rate you can't get
• • Peace of mind has value
• • You can always refinance later if rates drop significantly

Frequently Asked Questions