Borrowers everywhere want to know – when should they lock in a mortgage rate? Is there a perfect day or time of day to do it?
We’d love to tell you that we can predict the future and tell you exactly when to lock your rate, that’s just not possible. But we can help you learn when to consider locking your mortgage rate for the best results.
Interest rates can change daily or even several times a day. There’s no rhyme or reason to the changes either. But, in general, you can expect steadier rates to show up at the end of the week. After the week’s news has had time to take its effect, you’ll see the steadiest rates on Thursday or Friday.
Does this mean you should only lock on Thursday or Friday? No, it doesn’t. You should use all indicators that help you decide what rates may do. For example, if it’s Monday and it hits the news that the Fed may increase the rates – by all means, lock your rate in on Monday. But, if nothing notable is happening, waiting until the end of the week may provide you with the lowest rate at that time.
When’s the Right Time?
There’s no ‘golden time’ to lock in your interest rate. Again, pay close attention to the news. If nothing ‘big’ is coming up, lock when you feel most comfortable. Ask yourself:
- Will you feel better if you lock the rate in now? Will you sleep better knowing that you have a decent rate rather than waiting to see if they drop?
- Will you feel worse if you lock in now and rates drop? If you can handle the ‘gamble’, you should wait then. If it will drive you nuts that rates dropped 1/8th of a point, then just wait to lock your rate until you are certain of the rate you choose.
Decide if Want a Float Down
One way to make locking in your rate easier is to include a float-down provision. This provision gives you the option to take the lower rate should rates drop. Keep in mind that this isn’t free. Lenders charge a fee to do this, so rates need to drop drastically in order for it to make sense.
But, if knowing that you have the provision to float down your rate helps you lock it in, then go for it. If rates do drop, you can stay with the same lender and just pay a small fee to lower the rate. Of course, before you do, make sure you’ll save enough money on your interest rate to make paying the fee worth it.
The final option, which requires the most work, of course, involves changing lenders. You aren’t tied to one lender just because you locked in your interest rate. If rates drop that much that it’s worth changing, go for it.
Just know that you’ll have to go through the entire process over again, including locking in your interest rate. Just like with the float down provision, make sure it’s worth it. Will you save that much money changing lenders and taking the lower rate? Don’t forget to look at the fees. Each lender charges different fees. If the new lender has excessive points or fees on the loan, your lower rate may not be beneficial after all.
In the end, locking your rate is a personal decision. It’s one you need to be comfortable with when you make the decision. Once you lock your rate, it’s yours for the duration of the loan. If that means 30 years, you want to make sure you choose a rate you are comfortable with and that will keep your expenses to a minimum.