Indeed, when it comes to locking the interest rate on a loan, everyone wants to time it flawlessly in order to get the best deal possible. There are times when you'll get lucky with your loan lock, and there are times when you won't. It's obviously a gamble that many people are willing to take.

In simpler terms, a loan lock helps you keep your interest rate down even as rates across the market go up. Timing is essential for executing a perfect loan lock. Why is that? It's because you're ensured of paying a lower interest rate if and only if the rates go up by the time you're ready to close. A penny saved is a penny earned and all that.

Risks Involved

For the sake of argument, let's say you've decided to wait before locking your loan. You've chosen where you'll acquire a loan and perused through your mortgage options. However, you've noticed that the market is moving down, rates are cut twice, and you expect them to drop lower, so you decide not to lock.

Deciding not to lock is as much of a risk as deciding to lock depending on what happens next in this scenario. Then again, if rates go up unexpectedly, you have no protection against that event. A loan lock gives you the protection you need against financially damaging market trends and influences.

Elements to Loan Locks

There are three things you need to remember when opting for a loan lock with Lending Bee: interest rate, points, and lock period. You should also take note that borrowers tend to pay a premium to lenders when you decide to have an extended loan lock. The additional lock time isn't free, it influences the locked interest rate (it will become a bit higher), and the points will reflect the loan lock fee.

All of these conditions help alleviate the risk that Lending Bee is taking in case the rates do go up once the transaction is processed. It's simple; whatever money you save out of locking your loan, the lender loses, especially if the negotiated loan is funded at a lower-than-market-grade rate. Regardless, the loan lock remains a popular option because it tends to give our clients the peace of mind they desire when applying for mortgage loans. It's a highly recommended service all in all.