Mortgage Rate Lock

AAA

DEFINITION of 'Mortgage Rate Lock'

An agreement between a borrower and a lender that allows the borrower to lock in the interest rate on a mortgage over a specified time period at the prevailing market interest rate.

The lender may charge a lock fee, which the borrower must pay if he or she does not lock the interest rate. Alternatively, the lender may charge a marginally higher interest rate to begin with, just in case the borrower chooses not to lock the interest rate.

INVESTOPEDIA EXPLAINS 'Mortgage Rate Lock'

When a borrower locks in a rate, it should be binding for both the borrower and the lender. However, some borrowers walk away from the agreement if interest rates fall, and unscrupulous lenders have been known to let lock periods expire if interest rates rise under the guise that the borrower could not process the necessary paperwork in time.

A lock deposit requirement indicates that both the borrower and the lender intend to keep the agreement.

RELATED TERMS
  1. Lock Period

    A number of days, often 30 or 60, during which the interest rate ...
  2. Droplock Security

    A security that is issued with a variable or floating interest ...
  3. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  4. Mortgage Banker

    A company, individual or institution that originates mortgages. ...
  5. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  6. Mortgage Rate Lock Float Down

    A mortgage rate lock with the option to reduce the locked interest ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. Got A Good Mortgage Rate? Lock It Up!
    Home & Auto

    Got A Good Mortgage Rate? Lock It Up!

  3. A Tax Primer For Homeowners
    Taxes

    A Tax Primer For Homeowners

  4. Home-Equity Loans: The Costs
    Options & Futures

    Home-Equity Loans: The Costs

comments powered by Disqus
Hot Definitions
  1. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  2. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  3. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  4. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  5. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
  6. Direct Participation Program - DPP

    A business venture designed to let investors participate directly in the cash flow and tax benefits of the underlying investment. ...
Trading Center