When you apply for a fixed-rate loan, you typically get charged the interest rate that applies on the day your home loan settles – not the day you apply. As home loans can take a while to process, there’s a chance your interest rate could rise before settlement.
Rate lock can solve that problem.
Rate lock is a fee you pay to lock in the advertised interest rate at the time you apply. This means you won’t be negatively impacted if rates increase before settlement.
Imagine you applied for a fixed-rate home loan at 3.50%. If you add a rate lock, and the interest rate subsequently rises to 3.80% in the time it takes for your loan to settle, you would be charged only 3.50%.
If the interest rate drops below your ‘locked in’ rate, some lenders will give you the lower of the two.
So in the above example, if the interest rate subsequently falls to 3.20% in the time it takes for your loan to settle, you would be charged only 3.20%.
Some lenders offer rate lock for free, although most charge for the service.
This fee varies from lender to lender. Some will charge a fixed dollar fee, which might be around $500. Others will charge a percentage-based fee, which might be around 0.15% of the loan amount.
We appreciate your message and a Shore Financial Adviser will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
We appreciate your message and a Shore Financial broker will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
