Summary: The interest rate on a mortgage is key to determining how much you will pay over the life of the loan. In this article, we’ll discuss the opportune time to lock in a mortgage rate to ensure you get the lowest rate possible.
If you’re considering applying for a mortgage sometime soon, you’ll want to take the time to compare the different terms of mortgage products among different lenders.
And while there are various important mortgage terms to consider, perhaps one of the more important ones is the interest rate.
After all, the rate charged on your mortgage will determine exactly how much you’ll be responsible for paying over the life of the loan. The higher the interest rate, the more expensive your mortgage will be. As such, a lower interest rate what you’re aiming for.
If you’re offered a relatively low rate that you want to make sure remains once you obtain final mortgage approval, you may want to consider “locking” it in.
But what does this mean, exactly? And what is the best day of the week to lock a mortgage rate?
How Are Mortgage Rates Determined?
Before we get into locking in mortgage interest rates, it’s helpful to have a general understanding of how mortgage interest rates work and how they’re determined.
Interest rates on mortgages depend on a variety of things, including your credit profile and what the lender is able to offer. Live mortgage rates will also fluctuate over time and will be influenced by factors including:
- The Federal Reserve’s monetary policy
- The economy
- The housing market
- Your financial health
Mortgage interest rates are also based on mortgage-backed securities like bonds, which are traded similar to stocks. And like stocks, these securities can change in price at any time of the day or week.
Right now, the current mortgage rate as of this writing is 4.12% for a 30-year fixed-rate mortgage, though these numbers can change by the hour.
Locking in Your Mortgage Interest Rate
Right now, we’re still in the middle of a somewhat low-rate environment compared to where rates were over a decade ago. As such, you have the benefit of having lower rates available to you if your financial profile is strong.
But rates can and still fluctuate over the week and even over the hours in a day. As such you’ll want to time your “lock in” just right to make sure you’re getting the lowest rate possible.
But what does it actually mean to “lock” in a mortgage interest rate? Basically, it means that your lender promises to provide you with a specific rate for a certain amount of time. After that time elapses, the rate can change.
Both you and your lender would enter into a contract or agreement for a specified amount of time, during which the lender will honor the rate they promised you, regardless of what happens to rates during that time period.
Generally speaking, a mortgage rate lock is good for 30 days, which means the lender will honor the given rate for 30 days. If rates increase during that time frame, you have the benefit of retaining the lower rate you locked in with.
It’s important to keep in mind, however, that the closing date of your home must take place within that 30-day timeframe in order for you to take it advantage of that locked-in rate. If it takes more than 30 days to close on the home, the agreement will no longer be valid, and you may be subject to lock extension fees.
The good news is that interest rate locks are available for longer than 30 days. It is common to lock a rate for 45, 60 or 90 days with some rate locks as long as 6 months. You only want to lock a rate for the timeframe needed to close your loan as the costs are higher to lock for extended time periods.
It’s not very common for buyers to request rate locks for longer than a 60-day period given the higher rate/fees associated with extended locks. The majority of the time a buyer would be better off waiting to lock for a shorter timeframe. Once you are within 60 days of closing it is recommended it is advisable to discuss locking with your Loan Officer.
What’s the Best Day of the Week to Lock Mortgage Rate?
There may be certain days of the week that might be better than others to lock in at the lowest rate. The question is, when?
Live mortgage rates tend to be much quieter on Mondays, making the early part of the week a potentially better time to lock in at a lower rate. On the other hand, volatility is more likely to occur in the middle of the week when rates could fluctuate while you’re shopping for a mortgage.
That said, rates could still plummet in the middle of the week, allowing you to take advantage of a lower rate and therefore make your mortgage more affordable. But they could also surge, which means you’ll be paying more if you lock in your mortgage interest rate the wrong time.
Locking in at the right time can mean the difference of tens of thousands of dollars over the life of your loan. That said, it’s important to get familiar with how mortgage interest rates actually work in order for you to understand how mortgage rates are actually calculated.
If you are offered a great rate for a mortgage and believe rates are expected to increase soon, it might be worth it to consider locking in your rate. Be sure to speak with a seasoned mortgage specialist who can help guide to mortgage interest rates and when it might be a good idea to lock in.
Ready to Apply For a Mortgage?
Sammamish Mortgage can provide you all the information you need to lock in at the lowest rate possible to save you money! We have been providing mortgage programs to borrowers across Washington, Oregon, Idaho, and Colorado since 1992, and we’d love to help you. Get in touch with us today to get started!