Mortgage Rate Lock

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.

BREAKING DOWN '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. Mortgage Rate Lock Deposit

    A fee that a lender charges a borrower that allows the borrower ...
  2. Loan Lock

    The securing of a specified interest rate on a mortgage that ...
  3. Lock Period

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

    A mortgage rate lock with the option to reduce the locked interest ...
  5. Locked-In Interest Rate

    Referring to a loan where the borrower and lender agree on a ...
  6. Locked Market

    A market in which a stock's bid and ask prices are identical. ...
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. Economics

    Forces Behind Interest Rates

    Get a deeper understanding of the importance of interest rates and what makes them change.
  3. Credit & Loans

    Questions To Ask Your Mortgage Lender

    When buying a house, avoid nasty surprises by asking the right questions about your mortgage lender's qualifications and the mortgage process.
  4. Credit & Loans

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  5. Credit & Loans

    How Lender Overlays Prevent Mortgages

    Loan applications are increasingly being rejected because of lender overlays.
  6. Credit & Loans

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  7. Options & Futures

    Lending Clubs: Better Than Banks?

    If you need to borrow money and your credit is making it tough, this new option may be just what you're looking for.
  8. Credit & Loans

    How To Shop For Mortgage Rates

    Take these 5 steps to getting the lowest possible rate for your mortgage. Small percentage differences can mean big savings down the line.
  9. Credit & Loans

    How To Pick The Right Lender When Refinancing A Mortgage

    Refinancing your mortgage has never been easier with the range of lenders and access to information that are available to you.
  10. Home & Auto

    How To Negotiate Your Closing Costs

    Closing costs can't be avoided altogether, but you can lower them. While there are a lot of fixed costs, there are also variable ones you can save on.
RELATED FAQS
  1. Does inflation favor lenders or borrowers?

    Find out under what circumstances inflation benefits borrowers more than lenders and in which situations inflation can be ... Read Answer >>
  2. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  3. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  4. What is the difference between a fixed annual percentage rate (APR) and a variable ...

    Fixed ARP and variable APR loans operate differently but serve the same purpose: to collect interest from a borrower so the ... Read Answer >>
  5. What is the difference between the Five Cs of Credit and credit rating?

    Learn the difference between the five C's of credit and credit rating and how they are used together by banks and finance ... Read Answer >>
  6. What factors should I consider when shopping for the best mortgage lender?

    Comparing lenders to obtain the best mortgage loan requires research and willingness to shop around for the best loan to ... Read Answer >>
Hot Definitions
  1. 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, ...
  2. 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.
  3. 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 ...
  4. 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 ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center