Loan Lock

DEFINITION of 'Loan Lock'

The securing of a specified interest rate on a mortgage that is in the process of being approved. A loan lock establishes the interest rate that a borrower will pay as long as the loan closes before the end of the lock period. Lock periods typically last from 30 to 60 days, though in markets where the loan approval process is slow, the lock period can last as long as 90 days.

BREAKING DOWN 'Loan Lock'

Borrowers like lock periods because they take away the uncertainty associated with constantly fluctuating mortgage rates. Particularly with expensive homes, a small increase in interest rates can mean a big change in monthly payment. This can sometimes mean the difference between an affordable mortgage payment and an unaffordable one.

RELATED TERMS
  1. Lock Period

    A number of days, often 30 or 60, during which the interest rate ...
  2. Mortgage Rate Lock

    An agreement between a borrower and a lender that allows the ...
  3. Mortgage Rate Lock Float Down

    A mortgage rate lock with the option to reduce the locked interest ...
  4. Locked Market

    A market in which a stock's bid and ask prices are identical. ...
  5. Treasury Lock

    A hedging tool used to manage interest-rate risk by effectively ...
  6. Mortgage Pipeline

    Mortgage loans that have been locked in with a mortgage originator ...
Related Articles
  1. Home & Auto

    How To Properly Research For The Best Mortgage Rate

    You’ve probably been told to shop around for the best rate, but what exactly does that entail? Find out how to ensure you're getting the best possible rate on your mortgage.
  2. Mutual Funds & ETFs

    Financial Institutions: Stretched Too Thin?

    Find out how to evaluate a firm's loan portfolio to determine its financial health.
  3. Home & Auto

    Homebuyers' Walkthrough: Which Type Of Mortgage Is Best?

    Most homebuyers will need to secure a mortgage to finance their home. The lending climate has changed following the late 2000s financial crisis, and it may be more difficult to get approved for ...
  4. Credit & Loans

    Why It’s So Hard to Get Small Mortgage Loans

    Finding a lender to provide a mortgage loan for less than $50,000: It's a challenge faced by a surprising number of people, and one that's often tough to solve.
  5. Savings

    Reduce Interest With An All-In-One Mortgage

    "Offset" mortgages combine a checking account, home-equity loan and mortgage into one account.
  6. Credit & Loans

    5 Ways To Get The Best Mortgage Rates

    A mortgage is the biggest loan most people have. Be sure you get the best possible terms – you'll be paying it off for years.
  7. Investing Basics

    10 Ways to Profit From an Interest Rate Increase

    Discover 10 possible ways that individual investors and businesses can potentially profit from an environment of rising interest rates.
  8. Home & Auto

    Getting A Mortgage: How The Process Has Changed

    After the banking crisis, banks have tightened their lending standards. Find out how the current mortgage-lending standards have changed in the last five years.
  9. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  10. Credit & Loans

    How Interest Rates Work On A Mortgage

    A step-by-step explanation of the interest calculations, mortgage types, and how the loan is eventually "retired" – which means paid off.
RELATED FAQS
  1. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ... Read Answer >>
  2. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
  3. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  4. Are secured personal loans better than unsecured loans?

    Read about the differences between secured loans and unsecured loans and how they are used. Learn about forms of collateral ... Read Answer >>
  5. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
  6. What are the differences between delinquency and default?

    Find out more about loan delinquency, loan default, and the difference between a loan borrower defaulting and being delinquent ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center