Mortgage Rate Locks Explained: How They Work and When to Lock

Mortgage rates can change daily, sometimes several times a day. When you are buying a home or refinancing, a few weeks pass between your application and closing. A rate lock is the lender's promise to hold a specific rate and pricing for a set period while your loan is processed. Knowing how locks work helps you avoid surprises, especially if your closing gets delayed.

What a rate lock covers

A rate lock typically guarantees:

• The interest rate
• The points or lender credits tied to that rate
• The loan program and terms you locked

It holds only as long as your loan details stay the same. If your credit score, loan amount, down payment, property appraisal, or income changes in a way that affects pricing, the lender may adjust your rate or fees even during the lock period.

Typical lock lengths

Common lock periods are 30, 45, and 60 days, with some lenders offering longer locks, especially for new construction. Longer locks usually cost more, either as a slightly higher rate or a fee, because the lender is taking more risk that rates will rise.

Choose a lock that comfortably covers your expected closing date with some cushion. Loans frequently take longer than planned because of appraisals, title issues, document requests, or seller delays.

When to lock

You can usually lock only after you have a property under contract for a purchase, or once your refinance application is in process. Some lenders offer locks earlier as part of special programs.

There is no perfect timing. Waiting may get you a better rate if markets move in your favor, but rates can just as easily rise. Many borrowers lock as soon as they have a contract and a rate they can afford, rather than trying to predict the market. "Floating," or not locking yet, is a bet that rates will fall before closing.

Worked example (illustrative numbers only)

These figures are hypothetical. Lock pricing and extension fees vary widely by lender.

You lock a $360,000 loan at 6.50% for 45 days. Two weeks before closing, the appraisal is delayed and your closing date slips by 10 days.

• Your lock would expire before the new closing date.
• The lender offers a 15-day extension for 0.125% of the loan amount: $360,000 × 0.125% = $450.
• Alternatively, if your lock expires, you might have to relock at the current market rate. If rates have risen to 6.875% by then, your principal and interest payment on a 30-year loan would rise from about $2,275 to about $2,365, roughly $90 more each month.

In this case, paying a few hundred dollars to extend protects you from a much larger long-term cost. If rates had fallen instead, relocking might work in your favor, but many lenders have policies that limit relocking to the worse of the old or new rate.

Float-down options

Some lenders offer a float-down provision. If rates drop by a certain amount after you lock, you can switch to the lower rate once, usually for a fee or with conditions. Details vary widely:

• How much rates must fall before the float-down applies
• Whether you pay a fee upfront or only if you use it
• When during the lock period you can exercise it

A float-down can be useful in volatile markets, but read the terms closely.

Common mistakes that can cost you a locked rate

1. Opening new credit before closing, such as financing furniture or a car. New debt can change your debt-to-income ratio and your approval.
2. Changing jobs or income type mid-process without telling your lender.
3. Moving large sums of money between accounts without documentation.
4. Missing document requests, which delays underwriting and can push you past the lock expiration.
5. Assuming the lock is in place. Always get the lock confirmation in writing, including the rate, points, and expiration date.

Locks on refinances and new construction

Refinance locks work much like purchase locks, but the timeline is driven by your lender and appraiser rather than a seller's contract date, so delays are often within your control. Respond to document requests quickly and schedule the appraisal early.

New construction is different. Builds can take many months, and standard locks may expire long before the home is finished. Some lenders offer extended locks of several months or more, typically for an upfront fee or a higher rate, and sometimes with a one-time float-down. Ask how the fee is handled if construction runs late, and whether part of it is credited at closing.

Questions to ask your lender

• How long is the lock, and what is the exact expiration date?
• Is there a fee for this lock length?
• What does an extension cost, and in what increments?
• Do you offer a float-down, and on what terms?
• What changes in my application could affect my locked pricing?

FAQ

Does locking my rate cost money?

Standard short locks are often included in the loan pricing. Longer locks, extensions, and float-down options may cost extra, either as a fee or a slightly higher rate. Ask for the cost of each option in writing.

Can I switch lenders after locking?

Yes, but your lock with the first lender does not transfer. You would start a new application and lock with the new lender at that lender's pricing. Some lenders charge nonrefundable fees, such as an appraisal fee, that you would lose.

What happens if rates drop after I lock?

Without a float-down provision, you generally keep the locked rate. Some lenders may renegotiate if the drop is large, but they are not required to. A float-down gives you a defined way to benefit from lower rates.

Check what a rate change means

Use the Rateboard mortgage payment calculator to compare your locked rate with a higher or lower rate and see the monthly difference. That makes it easier to decide whether an extension fee or float-down is worth paying.

Rateboard guides are educational and are not financial advice. Lock terms vary; get them in writing from your lender.