What Happens if Your Rate Lock Expires?

What Is a Rate Lock?

A rate lock is when your lender commits to holding your mortgage rate for a specific period of time while your mortgage application is being processed. Even if market rates change during that window, you don't have to worry about your rate increasing.

The only reason your mortgage rate could change during your rate lock period is if there are changes to any information on your application, such as your down payment, income and credit score.

Let's say a lender offers you a 7% rate on a mortgage. If you lock it in for 30 days, that rate stays the same throughout the mortgage process, no matter what is happening to mortgage rates. But if the deal doesn't close before the 30 days are up, your lender may charge a fee—often a percentage of the loan—to extend the lock period.

When Should You Lock Your Rate?

Generally, you can lock in your rate after you've submitted your mortgage preapproval application up until several days before closing. The lender may note the lock's expiration date in your preapproval letter.

A rate lock doesn't just protect you from a more costly mortgage—it's also a necessary step for the lender. They need to finalize the rate to calculate your loan terms and prepare the closing documents.

Learn more: When Should I Lock In My Mortgage Rate?

How Long Do Rate Locks Last?

Mortgage rate locks typically last 30 to 90 days. If market rates rise due to inflation, loan demand or other factors, you can have the peace of mind knowing your rate isn't going to change. Just make sure the rate lock lasts through your projected closing date, which is usually 30 to 60 days after your offer is accepted.

If you agree to a 30-day escrow after the seller accepts your offer, choosing a rate lock that lasts 30 days could protect your rate but you may be cutting it close. A 45- or 60-day lock may be more cost-effective than choosing 30 days and paying to extend it later. You'll also have more wiggle room if there's a delay that pushes back your closing.

While there's usually a fee to extend your rate lock, your lender should waive the extension fee if the rate is expiring due to a delay that's their fault. Similarly, if the seller is responsible, you might be able to negotiate to have them pay it.

Tip: If you anticipate mortgage rates falling, ask your lender for a floating rate. You'll keep your rate from rising, but you'll also be able to take advantage of a lower rate if rates drop before closing. Lenders typically charge a float-down fee between 0.5% to 1% of the total loan amount.

What Happens if Your Rate Lock Expires?

If your rate lock expires before closing, you'll likely need to pay for a rate lock extension ranging from 0.5% to 1% of the total loan amount. So if your loan amount is $400,000, for instance, the fee might be between $2,000 and $4,000. However, some lenders will waive the fee if you only need a few extra days.

Not every lender charges a rate lock extension fee. If your lender won't cover the fee and you don't want to pay the extension, you'll have to accept the prevailing interest rate at the time of closing. That could cost you more if rates have gone up, but in certain scenarios it might be worth it, such as when:

• Mortgage rates have dropped. If current mortgage rates are lower than what you locked in, you'll pay less interest over time by letting your rate lock expire.
• You're refinancing and can wait. If you're refinancing and not facing a strict deadline, accepting the current rate may give you more time to shop around or wait for a better deal.
• Your creditworthiness has improved. If your credit, income, debt-to-income ratio (DTI) or down payment has changed during the mortgage loan process, you may qualify for a better rate after your rate lock expires.

How to Lock In a Mortgage Rate Before It Expires

Follow these steps to lock in your rate and choose a lock period that won't expire before closing.

1. Improve your credit score before applying. The higher your credit score, the greater your odds of getting a low rate that's worth locking in. You can check your FICO^® Score^Θ for free with Experian to see where you stand and take steps to boost your score if necessary before applying.
2. Shop multiple mortgage lenders. As you compare different mortgage lenders, ask them about their lock periods, float-down options and rate extension fees. These details can help you choose the offer that's not only affordable but also more likely to reach closing without problems.
3. Apply for the mortgage. After choosing the best loan offer, submit your application for the home loan. Keep the approval process on schedule by submitting supporting documents your lender asks for promptly.
4. Request a rate lock. If you're satisfied with the rate you receive, ask the loan officer to lock it in to protect it from an increase. If you think mortgage rates might rise during escrow, consider locking in a float-down rate option.

Tip: Ask your lender about their average loan processing time to help you choose a rate lock period that doesn't expire before closing. You may want to add on an extra week or two to cover any potential delays.

Learn more: Average Mortgage Rates by Credit Score

Protect Your Loan Terms and Your Closing

An expired rate lock is just one of many potential issues that could affect your loan and closing. If you're financing a home, it's critical to avoid making any big financial moves like opening a new credit account, changing jobs or increasing your credit card balance. These are common mortgage closing mistakes that could affect your loan terms or even cause you to fall out of escrow.

Stay on top of your credit to help protect your rate and keep the closing on track. Check out Experian's free credit monitoring, which alerts you to credit changes like a new inquiry or a balance increase. That way you can catch issues early and avoid surprises that might jeopardize your rate or your loan.