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 Banker

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

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

    A mortgage rate lock with the option to reduce the locked interest ...
  6. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
Related Articles
  1. Credit & Loans

    4 Steps To Attaining A Mortgage

    It starts with knowing your choices as well as your price range. We show you how to get there.
  2. Home & Auto

    Got A Good Mortgage Rate? Lock It Up!

    Rising rates mean rising profits for lenders, providing incentive to increase rates whenever possible.
  3. Taxes

    A Tax Primer For Homeowners

    Go beyond interest and find out how mortgage points affect your taxable income.
  4. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  5. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  6. Home & Auto

    Save $30,000 For A Home Down Payment In 5 Months

    Before tackling mortgage rates, home maintenance costs and utilities, every home buyer must first gather the funds for a mortgage loan down payment.
  7. Credit & Loans

    The Tangled Web of Interest Rates, Mortgage Rates, And The Economy

    The article looks into the interwoven relationship between the economy, interest rates, and mortgage rates.
  8. Credit & Loans

    Getting A Mortgage When Building Your Own Home

    It's much harder to get a loan when you're building a home, not moving into one. Here's where to look and what to expect.
  9. Credit & Loans

    Understanding Loan-to-Value Ratio

    Loan-to-value ratio (LVR) is a tool used to evaluate the risk in a collateralized loan, usually a mortgage loan.
  10. Credit & Loans

    Is Now the Right Time to Buy a House?

    Thinking of buying a home? Consider these factors first.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center