When it comes to extending a rate lock, it is important to consider the policies and fees involved before making a decision. This can be a beneficial option for borrowers who want to secure their interest rate during the mortgage process, especially if there’s a chance that rates may increase in the market. However, it is worth noting that extending a rate lock usually comes with a cost.
The fees for extending a rate lock can vary from lender to lender. Some lenders charge a flat fee, while others base it on the loan amount or the length of the extension. These fees can range from 0.25% to 1% of the loan amount.
In addition to these fees, borrowers should also think about the impact on their monthly mortgage payments. By extending the rate lock, borrowers are essentially pushing back their closing date, which means they’ll have to make additional payments during this period. It is important to calculate whether these extra payments align with your financial situation.
It is also important for borrowers to be aware of the potential risks that come with extending a rate lock. One risk is fallout risk – if rates drop during the extended period, borrowers may miss out on the opportunity to secure lower rates available in the market. Another risk is related to changes in credit score; any significant changes during this period may affect eligibility and final terms for obtaining financing.
Some lenders may offer float-down options that allow borrowers to take advantage of lower rates if they become available before closing. However, these options often come with additional costs and restrictions.
Before deciding whether or not to extend your rate lock, it is crucial to carefully review all policies and fees associated with it. Consider your specific financial circumstances and evaluate whether paying these costs outweighs any potential benefits gained from an extended rate lock period.