“Rate Lock” and other Ways to Get a Lower Interest Rate
Freezing the Rate
When you’re offered a “rate lock” from the lender, it means that you are guaranteed to keep a certain interest rate over a determined period for the application process. This saves you from going through your whole application process and finding out at the end that your interest rate has gotten higher.
Rate lock periods can be various lengths of time, between 15 to 60 days, with the longer spans generally costing more. You can get a longer period for your lock, but in doing so, will probably have a higher interest rate than you would have with a shorter period.
Additional Ways to Save on Interest
In addition to opting for a shorter rate lock period there are other ways to get a good rate:
- A bigger down payment will get you a better interest rate because you’re starting out with more equity.
- You may choose to pay points to improve your rate over the loan term, meaning you pay more initially.
- One strategy that is a good option for many people is to pay points to bring the rate down over the life of the loan. You’ll pay more initially, but you will save money in the end.