It is quite natural that most of the people would like to choose the appropriate time to lock the interest rate on their mortgage loan so that they would stand to benefit. You can’t find fault with them. You may also do the same thing if you are in their position. But, will everyone be able to get the benefits they thought of? It is only a game of chance. Even those who may not be lucky in getting the benefits from locking the interest rate, they can feel happy over one thing.
Risk in not locking the loan
Once the interest rate is locked, you are assured this way: should the interest rates increase when you want to close, you will have to only pay the lower rate of interest. If you do not lock the interest because the interest rates have been brought down by Fed twice and because you expect the rates to go down further, you are in for trouble. It is nothing but the sheer gamble. If the rates move up, you will have no protection and will be forced to pay the higher interest rate.
When you have decided on locking the loan, you have to consider a few points. They are:
a) interest rate;
b) Points; &
c) Length of the lock period
If the loan lock is to be extended, you will have to pay additional charges; it does not come free. The rate of interest will be somewhat higher because of the risk the lender is taking. There is a chance of the rate going up while processing the transaction and, if the no credit check loans is given at a lower rate, the lender will be losing. Locking he loan, however, gives the borrower enough respite.
Though a borrower has locked the rate, it is not necessary for him to stick to that particular lender. He can choose to go to any other lender for a loan, in the event of the rates going down when the transaction is about to close. It is unfortunate that many borrowers do not know this. May be, it is because the lenders do not keep the borrowers informed of the rates. Probably they are not inclined to permit the borrowers to go to other lenders. However, if the borrower, at the time of rates going down, tells the lender that he will go to another lender, he will agree for fresh negotiations. The lender does not like to lose a customer.
Depending on the period of lock, the points vary. For a 30-day lock, it will cost the borrower half a point; it is double if it is a 60-day lock. The fees are paid not in the beginning, only at the end. The fees are not paid if the borrower goes to another lender. The fees payable, could be computed into interest rate in case the borrower is not inclined to pay for the bad credit loans lock based on points. As matter of protection, it is advisable to lock your loan, particularly in view of the volatility of the market.