Locking in your interest rate is an important step in the mortgage process. But, did you know that your rate lock expires? Knowing rate lock expiration dates is very important, and here’s why…
During a real estate transaction, there may be causes for a delay in the closing date. For example, there may be issues with your loan paperwork, the lender may need more time to process your loan, or the seller may ask for an extension to accommodate their move. In some cases, such as the seller requesting an extension, you may have control over whether to allow the change. Knowing the extension date will give you a sense of how much cushion you have in the closing date. You will not want to delay it any further than the rate expiration.
Impact of Rate Lock Expirations
If your rate lock expires, it may cost you more money! Most lenders will charge a fee to extend your rate. The amount of that fee is typically calculated based on the interest rate at the time the extension is requested. It may cost you thousands of dollars to extend.
Why Can’t I Simply Get the Current Rate If My Rate Lock Expires?
Rate lock expirations don’t simply cause a new interest rate to apply to your loan. Your loan is evaluated by underwriting based on certain exact figures, such as your interest rate and monthly payment. If any of that information changes, the loan must go back through processing and underwriting, which could cause a lengthy delay. Some lenders don’t even allow you to change to the current rate, but rather mandate a rate extension.