When you're in the market to refinance, the term "rate lock" will be mentioned quite a bit throughout the process. With rates constantly fluctuating, it's difficult to know when you should lock a rate in. Learn the basics of a rate lock to make your decision easier and see how you can benefit by utilizing one.

The basics

As stated before, rates are constantly changing. This is the number one reason borrowers find rate locks to be so useful. By locking in your rate, this is confirming that it will not change between now and closing. Keep in mind, this is only the case if you close within the specified time frame that you and your loan officer decided upon. It's crucial for your rate lock agreement to be long enough to cover the full amount of time it takes to close your loan. Depending on your lender, you will have the option to pay for a longer lock period.

When to get a rate lock

Following your initial loan approval, you are able to lock in your rate. However, while it may be tempting to protect the first low rate you see, it might be in your best interest to lock your rate in later on down the line. Waiting to lock in a rate is something that is very common. This is due to the uncertainty of how long it will take to find a home. Thus, it's important to keep in close contact with your loan officer as much as you can when you are considering a rate lock. You will have a better idea of what way current rates are leaning because he/she is constantly tracking the market, and you will also get an insight on where future rates could be heading.