To lock or not to lock: that is the question…you should be asking if you own a home.
Banks often encourage home buyers to lock in their mortgage rates to guard against any rising borrowing costs. But seeing as how bankers were responsible for the collapse of the real estate market in 2008, it’s easy to understand why one would be wary of what they tell you to do with your mortgage. Locking your mortgage rate to protect against any increases may sound appetizing, but is it the right move for you? Here are the reasons should you lock your mortgage rate?
Rate locks allow home buyers to guarantee a particular mortgage rate if they close on the home sale within a set period, no matter the influence outside factors may have on the market. This way, home buyers can avoid larger monthly payments on their loan.
Since interest rates had been at historic lows, many people did not opt for locking their rates, but now with interest rates finally rising, it became a very popular action within the last year.
But the drawbacks can be significant. Locking your mortgage rate is a double-edged sword.
Why? To start, locking your rate comes at a price–literally. They offer free rate locks for as long as 45 to 60 days, the amount of time it takes to process a mortgage. Additionally, locked mortgage rates are typically higher than the market rate by and eighth to a quarter percent.
Locking your mortgage ultimately depends on what you can afford. If you want help with the process of securing your mortgage, or advice on whether you actually should lock your house mortgage, contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.