18. Locking of mortgage rates
When applying for a mortgage you will usually have the option of asking for a
rate lock. If you think rates will go up, it will be wise to lock the rate. Usually, the
lender will want a sizeable earnest deposit from you to execute a rate lock. The deposit
is to show your commitment to going through with the mortgage deal. After all, the lender
will be committing to his supplier of funds for the amount of your loan. So if you back
out, the lender will be stuck with having to take the loan himself.
You can usually let the rate float right up until loan settlement. However, if
rates are highly volatile and you are sure you wont be backing out on the deal,
locking the rate can provide a great amount of peace of mind.