When to Lock or to Float Your Mortgage

For most people, especially borrowers, the deciding factor over locking or floating on a rate is the length of closing. This mainly has to do with the inconsistency of today’s rates. For the past several months, rates have been historically low and fluctuations have been slight. There are those weeks, however, where rates have spiked and created hesitation and concern for many borrowers.

There are several different factors to consider when taking into consideration when to lock and when to float.

Lock and Load

Banks can be quite apprehensive when it comes to clients deciding to lock interest rates. It is because the rate upon application would not necessarily apply in time for closing. Banks usually offer higher interest rates and/or higher applicable fees in anticipation of the inconsistencies and instability of the rates. And the borrowers are likely the ones to suffer.

Floating By and By

Allowing the rates to float can work for borrowers, as they would not suffer to be locked in a specified interest rate when it goes down in the market. However, if the interest rates rise then clients also have to deal with paying off more than would have had they locked into a rate arrangement.

The Guessing Game

Predicting how the rates will change in the next few days, weeks, months, and years is like playing a guessing game. The best rule of thumb is to talk to a mortgage specialist when rates are at a good point. They can advise you on how to get the best rate for your current mortgage situation and help take out some of the guessing work of the market.

Your Best Option

A lot of people will tell you the best option for a guaranteed low rate is to lock in when the closing is a few days or weeks away from the application. The general idea is to lock interest rates if the closing is up to two months or 60 days, since locking an interest rate works well for a short period.

However, if the closing is past 60 days, it is presumably better to your float interest rate. When interest rates do fall, borrowers can enjoy the benefit of being handcuff-free from a specified interest rate and hope it will keep that way or keep falling until the closing period.

About the Author

Josh Harmatz is a seasoned veteran of the lending business and currently is the Chief Financial Officer for Voyage Home Loans, a Sacramento, California, mortgage business that is a direct lender of FHA loans. An honors graduate from the School of Business at Sacramento State with both a BS and an MBA, he believes his higher education is the cornerstone of his success. He operates his mortgage business with the highest integrity and a strong work ethic, while building reliable relationships with all of his clients. He is committed to his vision of improving business operations through technology, education, and trust.

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