A rate lock in refinancing a home loan is an agreement between the borrower and the lender to lock in a specific interest rate for a certain period of time, typically between 30 and 60 days. This means that the borrower is protected from any potential interest rate increases during that period, even if market interest rates rise.
When a borrower applies for a refinance, the lender may offer a range of interest rate options. If the borrower decides to lock in a particular interest rate, the lender will provide a written agreement specifying the locked-in rate, the duration of the lock period, and any associated fees or costs.
Rate locks can provide borrowers with peace of mind and protection against interest rate increases while their refinance is being processed. However, if the rate lock period expires before the refinance is completed, the borrower may be subject to a higher interest rate if rates have increased.
It’s important to carefully consider the length of the rate lock period and to ensure that the refinance can be completed within that time frame to avoid potential issues.