What is a Rate Lock?

Rate Lock Definition

A rate lock refers to an agreement between a mortgage lender and a borrower to fix a certain interest rate for a number of days between the issuance of a mortgage approval and closing of the real estate purchase and mortgage loan. The rate lock protects the borrower against mortgage rates rising in the month or months between initial approval and closing.

Mortgage rates can fluctuate daily, and like other marketable items, are subject to immediate change based on market conditions. However, mortgage rates have a substantial effect on the monthly payment of the borrower, and if the market rates change rapidly and substantially, it may affect the ability of the buyer to purchase the home of his or her choice.


Mr. McGillicuddy is beginning the house hunting process but is concerned that mortgage rates will increase in the near future, perhaps before they can find a home. To protect himself from possible rising rates, Mr. McGillicuddy obtains a rate lock or “pre-approval” from their lender, insuring that upon closing of their future purchase, the current 5% interest rate they want will still be available. However, the bank will require Mr. McGillicuddy to find and purchase a home within a certain time frame or the rate lock will expire.

Are you are looking to lock in a mortgage rate? Get preapproved now!

As is apparent in the example, a rate lock prevents the buyer from becoming a victim of market circumstances, if interest rates increase rapidly prior to closing. The buyer need not fret over market conditions, and will be assured that the rate will be available as long as they find and purchase a home within the stipulated time frame – usually 90 to 120 days.

If interest rates have fallen, the lender will abandon the rate lock and provider the borrower with the current, lower rate.

At First Foundation we understand that even a small adjustment of the mortgage rate will have a great effect on your mortgage payment and eventual payoff. We always recommend obtaining a pre-approval or rate lock prior to house hunting to put your mind at ease and to gauge potential mortgage payments.

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If you are interested in learning more about locking in a mortgage rate, please feel free to contact us today!

Last updated Feb 11, 2019