What Is a Rate Lock?

Short answer

A rate lock is the lender's written commitment to hold your interest rate and points for a set number of days, commonly 30, 45 or 60, while the loan is processed. If market rates rise before closing, you keep the locked rate. If the lock expires before you close, you may pay an extension fee or be repriced at current market.

Definition

A rate lock fixes the interest rate and price of your loan for a defined period so that daily market movement does not change your payment before closing. Longer locks cost more than shorter ones because the lender takes on more market risk.

Worked example

You lock a $500,000 loan at 6.50% for 45 days on October 1, with a closing date of November 10. The condo questionnaire comes back late and closing slips to November 20. Suppose the lender charges 0.125% of the loan per 7-day extension: $500,000 x 0.00125 = $625 for one week, $1,250 for two. Compare that with letting the lock expire: if rates moved to 6.75%, the payment on $500,000 rises by roughly $82 a month, or about $29,500 over 30 years. Paying $1,250 to extend is the better deal. Illustration only; rates vary daily.

When to lock

You can usually lock once you have a signed contract and a complete application. Most buyers lock right away for a period that comfortably covers the contract closing date plus a cushion. Floating (not locking) is a bet that rates will fall; nobody can promise that.

• Ask for the lock confirmation in writing; it also appears on your Loan Estimate.
• Match the lock period to a realistic closing date, not the optimistic one.

Extensions and float-downs

If closing slips, lenders offer paid extensions, usually priced per 7 or 15 days. Some lenders offer a float-down: if rates drop meaningfully before closing, you can relock lower for a fee. Terms differ by lender, which is where a broker with 100+ lenders can shop the lock policy, not just the rate.

In South Florida

Lock timing matters more in South Florida because closings slip for local reasons: condo questionnaires and association approvals, slow HOA estoppel letters, insurance binders that take days during hurricane season, and milestone inspection or SIRS documents the lender needs to review. On new construction condos, where closing may be months away, ask about extended locks and float-down options rather than a standard 30-day lock.