Rate locks — a power tool for renovations and construction

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Whether you’re building a new home, upgrading your current property, or making changes so you can age in place, it’s important to make sure you’re getting a favorable interest rate to cover the costs.

One way you can protect yourself against projected mortgage rate increases is by locking in your interest rate. Since the Federal Reserve has indicated it plans to raise rates at least once during 2022, it’s smart for those who are building or renovating to learn how rate locks work.

This article provides a general overview, but you should always talk to a lending professional for advice related to your individual needs.

A rate lock is an agreement between a lender and borrower that a specific interest rate will be charged if the loan closes before the end of the lock period — even if interest rates go up.* You can “lock in” an interest rate up to 90 days before closing on your loan.  You may have the option to extend the lock further, so talk to your loan officer to get the details. 

In most cases, a rate lock agreement is made after the application has been accepted, but before underwriting thoroughly reviews your credit history, income, property appraisal, and other details. 

If you’re concerned about rates possibly dropping, we offer a “float down” option. This would allow you to take advantage of a lower rate, while remaining protected against rate increases.

We understand the unique situation of those who are building or renovating their homes, so we can help you choose the right financing option for your needs.

Reach out to us today to learn more about rate locks, which can potentially save you money on interest payments over the course of your home loan. We’re here for you!

*Pricing for long-term rate locks are based on Day pricing with specific add-ons determined by the lock term chosen. Float down option is based on current pricing plus a float down fee. Terms and conditions apply. Talk with your Loan Officer for details. 

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