What is a rate lock? A lender's commitment to hold a stated rate and points for a set number of days, so a rate agreed at application survives the weeks it takes to close.
A rate lock is an agreement that a lender will fund at a named rate and a named number of points if the loan closes within a stated period. Thirty, forty-five and sixty days are the common lengths, priced off the same rate sheet: the longer the lock, the worse the price, because the lender is carrying the risk for longer. Locking usually happens once there is a property and an accepted contract, though some lenders run a lock-and-shop programme that holds a rate for a buyer who is still writing offers, normally at a cost and for a shorter window.
Extensions and float-downs are the two levers once a lock is running. An extension buys more days, priced in fractions of a point and charged at closing; an eighth of a point on a $360,000 loan is $450. A float-down option, where a lender offers one, allows a single move to a lower rate if the market improves before closing, and is either bought up front or built into a worse starting price. Neither is standard, and both are written into the lock agreement rather than assumed.
A lock is attached to a specific loan, so changing the loan can break it. A different loan amount, a switch of product or term, a change of property, an occupancy change or a credit score that no longer supports the pricing all send the file back for a repricing. So does letting it expire: if closing slips past the last day, the usual outcome is worst-case pricing, meaning the lender reprices at the worse of the original rate and today's market. Since a financed purchase here commonly runs thirty to forty-five days from acceptance, a lock chosen with no room in it and an appraisal or a condition running late is the ordinary way this becomes expensive.
A worked example
A buyer locks 6.5 percent for 45 days on a $360,000 loan the day the contract is accepted. The appraisal is ordered late and the file clears underwriting on day 41, with the signing set for day 49. A 15-day extension is quoted at an eighth of a point, $450, charged at closing. Letting the lock lapse instead would reprice the loan at the worse of 6.5 percent and the market on the day, so the $450 buys certainty rather than a better rate.
How long a purchase actually takes
Questions people ask
How much does it cost to lock a mortgage rate?
Usually nothing separate for a standard 30 to 60 day lock: the cost is inside the rate, and a longer lock prices slightly higher than a shorter one. Extensions and float-down options are the parts that are billed, in fractions of a point at closing.
What happens if a rate lock expires before closing?
The loan is repriced. Most lenders apply worst-case pricing, taking the worse of the locked rate and the current market, so an expiry can only leave the borrower at the same rate or a higher one. An extension bought before the last day is the alternative.