How a Mortgage Rate Lock Works and When to Lock Your Rate
Mortgage rates change daily—sometimes hourly—with even a small shift meaning the difference between an affordable monthly payment or one that stretches your budget. This type of volatility isn’t theoretical; consider Freddie Mac’s Primary Mortgage Market Survey, speaking to how average mortgage rates can fluctuate significantly from one week to the next even in relatively stable markets. These short-term shifts can create real uncertainty for homebuyers trying to time their purchase.
In this guide, we’ll break down exactly how a mortgage rate lock works to help address this problem, when it makes sense to use one, potential costs, and what to look for when comparing rate lock options across lenders.
What is a mortgage rate lock?
A mortgage rate lock is a borrower-lender agreement guaranteeing an unchanged interest rate for a specific period of time during loan processing. Once your rate is locked, it won’t increase—even if market rates rise—so long as you close within the lock period and loan details stay the same.
What a rate lock covers
A mortgage rate lock typically covers:
Interest rate on the loan
Discount points (if applicable to lower your rate)
What a rate lock doesn’t cover:
Items typically not locked include:
Lender fees
Third-party charges
Closing costs
Final loan approval
Your lender will still verify your credit, income, employment, and the property itself during underwriting. If any major details (e.g., credit score, income, loan type, or home appraisal) change, your rate lock could be revised or canceled. It’s also worth noting that a rate lock isn’t just a promise to the borrower but a financial commitment for the lender.
When a lender locks a rate, they’re often hedging that loan in the secondary market—which is why many lenders can’t simply adjust a locked rate if market rates fall unless the lock includes a paid “float-down” option, a rate-lock add-on feature providing a one-time opportunity to adjust your rate to a lower market rate if conditions improve before closing.
Lower mortgage interest rate impact
Small mortgage rate changes can have outsized effects on borrower behavior. According to housing market research based on federal and mortgage industry data, a large share of U.S. homeowners currently have mortgage rates well below current market levels. This gap, in turn, makes many borrowers hesitant to move or refinance while also underscoring how sensitive affordability is to interest rate swings (and why tools like rate locks can help buyers manage risk during the closing process).
How does a mortgage rate lock work?
A mortgage rate lock usually comes into play once you’re serious about buying and have a loan in motion. The basic process looks something like this:
1. You apply for a mortgage
You share details about your income, debts, credit, assets, and the home you’re buying (or plan to buy).
2. You obtain pre-approval
The lender reviews your information and pre-approves you with an estimated rate, loan amount, and terms.
3. You choose a loan type
You’ll select either a 30-year fixed-rate conventional loan or 15-year FHA loan (for example), your loan type helping to determine the rate you’re offered.
4. You request a rate lock
Once you’re comfortable with the rate and terms, you’ll ask your lender to lock the rate for a specific period of time.
5. You pay the fee
Your mortgage rate lock fee is then due at closing.
The clock starts ticking when the lender issues the lock, your interest rate protected until the lock expiration date so long as your loan profile doesn’t materially change and you close within that same window. Here’s what happens next…
If rates go up: Your locked rate stays the same, potentially saving you money over the life of the loan.
If rates go down: You’ll generally keep your original rate unless your lender offers a “float-down” option (more on that later).
How long can a mortgage rate lock last?
Most initial mortgage rate locks last anywhere from 30 and 90 days—depending on the lender and type of loan—with this window designed to match the typical purchase duration until closing. While the most common options are 30, 45, 60, or 90 days, some situations (e.g., new construction) may allow for longer locks.
For most buyers, the decision reflects a window realistically getting them to closing without cutting it too close. The longer the lock, the higher the cost (generally) since the lender is guaranteeing the rate for a longer period and likewise assuming more market risk. Lenders typically base recommendations on loan type, completeness of documentation, and how quickly the transaction is expected to move. Since choosing a truncated lock can result in extension fees if closing is delayed, many borrowers opt for a slightly longer lock than they think they need to reduce stress should something hinder the process.
What does a mortgage rate lock cost?
When exploring mortgage options, you may come across mortgage rate locks advertised as "free." While this can be enticing, know such offers may carry hidden costs as they’re often factored into your interest rate rather than being charged upfront; lenders advertising a "free" lock may increase your rate to offset the corresponding risk.
How rate lock fees are structured
Fees charged for a mortgage rate lock are commonly calculated as a percentage of the loan amount, typically 0.25–0.50% or a flat fee. A 0.25% lock fee on a $300,000 loan, for example, would equal $750 with this amount paid at closing. The exact cost ultimately depends on factors such as the length of your rate lock and market volatility.
Trade-offs between rates and fees
A trade-off exists between the rate you choose and the amount you pay upfront. You might pay more to lock in a lower interest rate or accept a higher rate with fewer fees, with longer lock periods typically costing more than shorter ones since they expose lenders to more risk. In most cases, the borrower pays for the rate lock either directly or via the interest rate—which is why it’s important to understand how the lock is priced before committing.
Mortgage rate lock vs. float: What’s the difference?
When you’re deciding whether to lock your mortgage rate or let it float (fluctuate with the market), you’re essentially choosing between certainty and flexibility—the right option depending on how comfortable you are with risk, how long you have until closing, and what’s happening in the market.
Mortgage rate lock vs. float: a side-by-side comparison
Mortgage rate lock vs. float: how to decide which is right for you
Deciding on a mortgage rate lock or float depends on a few key factors, including:
Market conditions
If rates are trending upward or the market is volatile, locking can help protect your budget. If rates appear to be falling or are stable, floating can give you a chance at a better deal.
Your risk tolerance
If you’re comfortable with potential fluctuations and can manage a higher payment if rates rise, floating is perhaps worth the risk.
Your timeline
The longer your path to closing, the greater your exposure to market changes. A lock makes more sense if you’re nearing closing, with floating carrying more risk if the process drags out.
When should you lock your mortgage rate?
A common rule of thumb is to lock your rate once you’ve found a loan you’re comfortable with and are within 30 to 45 days of closing, which is when most paperwork is underway (and the risk of rate changes begins to increase as you get closer to final approval). Weigh these factors when deciding…
Market conditions
If interest rates are trending upward or moving unpredictably, locking can protect your budget from sudden increases. Consider a $500,000 mortgage financed for 30 years at 6%; should rates rise by only an eight of a point (0.125%), your monthly payment would likewise increase by $40. Over 12 years (the approximate average length of homeownership in the U.S.), that’s $5,760. A rate lock fee of 0.50%, meanwhile, would cost $2,500.
Time until closing
The closer you are to closing, the more sense it makes to lock.
Financial stability
If you need your payment to stay within a tight budget, locking provides certainty.
Risk tolerance
If uncertainty makes you nervous, locking will buy you peace of mind.
A common refrain among borrowers is that if you like the rate and it fits your budget, locking removes the mental stress of daily rate watching; should rates fall significantly later on, refinancing is often an option (though this comes with its own costs and considerations).
In sum: Is a mortgage rate lock right for you?
If you like certainty, have a tight budget, or are approaching your closing date, locking your rate can help avoid last-minute surprises. If you’re comfortable riding out ups and downs and think rates might improve, however, letting your rate float could offer a little more breathing room on cost. Either way, it pays to shop around. Compare offers from multiple lenders and look beyond the headline rate to lock details such as duration, associated fees, and implications if the closing date shifts. A few upfront questions can go a long way toward choosing a rate strategy that best fits your goals and keeps your homebuying budget on track.
Have questions about the mortgage process? Schedule a free consultation with one of our CFP® professionals to get them answered.
FAQs
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You can indeed do this in most cases, but it usually comes at a cost with lenders charging a daily or flat extension fee based on lock extension duration. If the delay is caused by the lender, some may waive the fee altogether. If closing is delayed due to issues such as appraisal problems, inspection delays, or paperwork, the borrower typically pays. Always ask about extension policies before locking your rate so you know what to expect!
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Doing this means not just comparing interest rates themselves but also full rate lock terms including length, cost (if any), extension fees, availability of float-down options, and cancellation or re-lock rules across lenders. Ask for everything in writing. A slightly higher rate with better flexibility is perhaps the smarter choice, depending on your timeline.
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A rate lock doesn’t guarantee loan approval and instead only protects your interest rate. You still need to go through underwriting, after all, with the lender verifying income, employment, credit, assets, and property details. If major information (e.g., your credit score, income, loan amount, or loan type) changes, your rate lock could be adjusted or canceled. Discuss any big purchases or actions that could potentially delay your loan approval with your loan officer.
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Some lenders may allow you to do this; depending on your credit profile and market conditions, you may be able to negotiate lock fees, lock length, extension costs, and float-down options. Some lenders may also have flexibility around when the lock begins or how rate adjustments are handled if market rates change before closing. Shopping multiple lenders gives you more leverage; if another lender offers a better rate lock structure, use this as a comparison point when negotiating.
About the author
The content in this post was developed by our team of writers and reviewed by our team of CFP® professionals here at Vision Retirement.
Retirement Planning | Advice | Investment Management
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Vision Retirement is an independent registered advisor (RIA) firm headquartered in Ridgewood, New Jersey. Launched in 2006 to better help people prepare for retirement and feel more confident in their decision-making, our firm’s mission is to provide clients with clarity and guidance so they can enjoy a comfortable and stress-free retirement. Schedule a no-obligation consultation with one of our financial advisors today!
Disclosures:
This document is a summary only and is not intended to provide specific advice or recommendations for any individual or business.
