As the housing market continues to experience unprecedented levels of demand, homebuyers are finding themselves in highly competitive situations. One way to give yourself an edge as a buyer is to negotiate an extended rate lock agreement with your mortgage lender.
What is an extended rate lock agreement?
An extended rate lock agreement is a contractual agreement between a borrower and a lender that locks in the interest rate for a specified period of time. A typical rate lock agreement lasts for 30 to 60 days, but an extended rate lock agreement can last anywhere from 90 to 180 days or even longer.
Why is an extended rate lock agreement beneficial?
The main benefit of an extended rate lock agreement is that it provides certainty and protection against interest rate increases. In a rising interest rate environment, an extended rate lock agreement can save a borrower thousands of dollars in interest payments over the life of the loan.
In addition, an extended rate lock agreement can give a borrower peace of mind knowing that they won`t have to worry about interest rates increasing during the home buying process. This can help with budgeting and financial planning, and can make the homebuying process less stressful overall.
How does an extended rate lock agreement work?
When a borrower and lender agree to an extended rate lock agreement, the lender agrees to lock in the interest rate on the loan for a specified period of time. During that time, the borrower is protected against any interest rate increases.
However, it`s important to note that an extended rate lock agreement typically comes with a higher interest rate than a standard rate lock agreement. This is because the lender is taking on more risk by agreeing to lock in the rate for a longer period of time.
Additionally, if the borrower doesn`t close on the loan within the specified time period, the rate lock agreement will expire and the borrower will need to renegotiate the terms with the lender. This can result in a higher interest rate or additional fees, so it`s important to stay on top of the closing process and make sure everything is moving forward as planned.
Conclusion
In today`s highly competitive housing market, an extended rate lock agreement can give homebuyers an edge and provide peace of mind during the homebuying process. It`s important to carefully consider the terms of the agreement and work with a reputable lender who can help you navigate the process and make informed decisions about your mortgage.