"Rate Lock" and other Ways to Get a Lower Interest Rate
What is a Rate Lock?
A rate "lock" or "commitment" is a promise from the lender to lock in a certain interest rate and a specific number of points for you for a certain period during your application process. This protects you from going through your entire application process and learning at the end that the interest rate has gotten higher.
Although there are several lengths of rate lock periods (from 15 to 60 days), the extended ones are usually more expensive. You can get a longer period for your lock, but in making this choice, will likely have a higher interest rate than you would with a shorter period
Other Ways to Save on Interest
There are other ways to get a lower rate, in addition to going with a shorter rate lock period. A bigger down payment will result in a better interest rate, because you're starting out with more equity. You can pay points to bring down your rate over the loan term, meaning you pay more up front. One strategy that makes financial sense for some is to pay points to reduce the rate over the term of the loan. You'll pay more initially, but you will come out ahead, especially if you keep the loan for a long time.
Real Property Finance can answer questions about rate lock periods and many others. Give us a call at 310-379-5997.
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