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Should you lock in a mortgage rate — and if so, when?

Yahoo Personal Finance· Getty Images
Jamela Adam
Updated 7 min read

Mortgage rates change daily, meaning the mortgage interest rate you see when you first apply for your mortgage preapproval or approval may not be the same rate you end up with at closing. That’s why mortgage rate locks exist. Simply put, a mortgage rate lock freezes your interest rate until the loan closes and protects you from rising rates.

Here’s everything borrowers should know about mortgage rate locks, when to lock in your rate, and whether a lock makes financial sense for you.

Learn more: 5 strategies to get the lowest mortgage rates

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A mortgage rate lock is a commitment from a lender guaranteeing that the interest rate on your home loan will remain the same until the day you close on the house — provided the mortgage closes within the specified time frame and there are no changes to your loan application. With a mortgage rate lock, the home buyer gets to keep the lower rate even if market rates go up.

However, if rates go down when you close on the mortgage loan, you could be stuck with a higher rate. A float-down option takes away that risk. Some mortgage lenders offer rate locks with float-down options, so you can still get a new rate if mortgage rates dip below your rate lock. It typically isn't free, though, and most lenders will charge you 0.5% to 1% of the loan amount. It will only make financial sense to exercise a float-down option if rates drop low enough to justify the cost.

The answer to when you can lock in your rate depends on the mortgage lender. Typically, you can lock in a mortgage rate at any time after you’ve been approved for the home loan and up to five days before closing. A lender might include a rate lock in the Loan Estimate, which it provides within three days before closing. Some lenders allow you to lock in a rate at other times, such as when you are preapproved.

But with all of these options, when exactly should you lock in a rate? The short answer is: Pay attention to market dynamics.

If interest rates have been stable, locking in your rate early may not be necessary. If rates are falling and are likely to continue in that direction, you may want to wait a bit before locking the rate since you could get a better rate in a few weeks. However, if interest rates are rising, and you’re worried you won’t be able to afford your mortgage with a higher interest rate, it’s worth doing a mortgage rate lock as soon as possible.

Dig deeper: How much house can I afford? Use the Yahoo Finance affordability calculator.

Depending on the lender, you can typically lock in a mortgage rate for 30, 45, or 60 days — sometimes even longer. As long as you close within the specified time frame, your mortgage rate won’t change. But if your rate lock expires before you close on the loan, you’ll have to pay a fee to extend the period of time. The interest rate lock extension fee is typically a percentage of your loan amount. The longer the extension, the higher the cost.

If you’re unsure whether locking in your mortgage rate is the right move, weigh these pros and cons to help you make an informed decision.

  • Protects you from interest rate hikes

  • You can typically choose from various lock periods, such as 30 or 60 days

  • Gives you peace of mind

  • Makes it easier to budget for your home and monthly payments since your interest rate is set

  • You could miss out on a lower interest rate if you don’t have a float-down option

  • You may have to pay extra to extend the lock after the expiration date

  • Many lenders charge rate lock fees

A mortgage rate lock can be helpful if market rates are trending up before your closing date. Take the following steps to lock in your mortgage rate:

  1. Shop around. Before locking in your mortgage rate, submit mortgage preapproval applications with at least three different mortgage lenders so you can compare potential offers. Besides interest rates, you’ll also want to compare things like down payment requirements, origination fees, rate lock periods, and float-down options.

  2. Find a home and make an offer. While many lenders allow you to lock in the mortgage rate any time after you’ve been approved for the home loan and up to five days before closing, you may have to pay extra to extend the lock if the rate lock expires before your loan closes. So, it might be best to start house-hunting and make an offer on the home you want before locking in a rate.

  3. Contact your lender. When you’re ready for a mortgage rate lock, reach out to your lender to select the mortgage rate lock period you want and fully understand your options.

Learn more: How much down payment do you need for a house?

We don’t have a crystal ball to tell you when mortgage rates will go down or whether it’s a good idea to lock in your mortgage rate today. Plus, rate predictions largely depend on who you ask. Experts at Fannie Mae and the Mortgage Bankers Association predict that the 30-year fixed mortgage rates will hover around 6.80% in Q3 of 2024.

For context, as of early July 2024, the 30-year fixed mortgage rate is 6.95%, according to Freddie Mac.

While mortgage rates could fall in 2024, it’s not a given. If you’re risk-averse and want to avoid any chance of your mortgage rate increasing, locking in your mortgage rate today may be the best option. But if you think rates will drop before you make an offer, choosing not to have a rate lock could make more sense.

The best mortgage lenders offer unique rate lock programs to attract customers. Here’s how some of them work

  • Newrez’s Lock & Shop Program. Newrez has a program that locks your interest rate for 45 days while you search for your new home. If rates drop during this period, the lender even lets you relock to get a lower rate at no extra cost.

  • Embrace Home Loans’ two float-down options. Embrace Home Loans allows you to lower your interest rate two times instead of one,up to 15 days before closing. Each float-down option costs 0.25% of your total loan amount.

  • Navy Federal Credit Union’s Special Freedom Lock. Navy Federal Credit Union mortgages offer a float-down option called Special Freedom Lock that lets you float down twice, but the total rate reduction cannot surpass 0.50%. Navy Federal doesn’t charge any fees when you exercise your float-down option unless you extend it past the 60-day rate-lock period.

If you’re locked in and mortgage rates fall, you’ll be stuck paying the higher rate unless your rate lock includes a float-down option. A float-down option lets you honor your locked-in rate or the current rate, whichever is lower. This option isn’t free, though. You can expect to pay between 0.5% to 1% of the loan amount when you use a float-down. For a $350,000 loan, that's $1,750 to $3,500.

Locking in your mortgage rate is typically worth it when rates are rising, and you want to protect yourself from paying a higher rate at closing. If mortgage rates increase after you’ve locked in the rate, you still get to keep your lower rate.

Lenders typically charge anywhere from 0.25% to 0.5% of your loan amount to lock in a mortgage rate. So, if you take out a $300,000 loan, you can expect to pay $750 to $1,500 for a mortgage rate lock.

This article was edited by Laura Grace Tarpley