Interest rates fluctuate just like stock prices, up and down throughout the day. So we get asked constantly: “Should I lock my interest rate today???”
Know that you have two options for your mortgage application – Locking or Floating.
◊ Floating Rate – Exactly what it sounds like, you assume all market risk. If rates improve, you get the better rate. If rates increase, you suffer the consequences.
***Given that floating puts you at risk, we typically do not advise it***◊ Locking Rate – Establishes your worse case scenario and removes anxiety.
Knowing your options that are available even after you lock will help you win the “Lock vs Float” battle.
- If you lock and rates increase before closing, you WIN because your rate is below the current market rates
- If rates stay the same, you still WIN because you removed anxiety and did not waste time looking up rates everyday.
- If rates drop before your closing, guess what, you still WIN because lenders will allow you to lower your interest rate if the market drops. Lenders would rather lower your rate and keep your business rather than watch you walk away and take it somewhere else.
Moral of the story, if you have a purchase agreement signed, lock as soon as you can!
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