Rate Lock Key to Staying A Step Ahead of Rising Mortgage Rates

Source: Informa Research Services

 

According to Informa Research Service’s Interest Rate Review®, the national average APR on a 30 year fixed mortgage rose 74 basis points over the past 6 months (from 6.00% to 6.74%).  Because we are in a rising rate environment, how can you ensure you get the best rate on your mortgage home loan?  Lock your rate.

 

When beginning your loan application process, you have the option to either lock or float your rate.  By locking your rate, you are opting to commit to the rate and points option available at the time of the lock.  Locking in your rate is one way to ensure the rate on your mortgage is not higher than expected upon loan closing.  This option can help offset the volatility of an uncertain market.

 

The other option is to float your rate.  Floating your rate means that you choose to lock-in your interest rate at some time after application, but before settlement.  The borrower becomes more vulnerable to market volatility and fluctuations in rates.  The advantage would come if you wait to lock-in and rates decrease, you may get a more favorable rate.

 

In a rising rate environment, locking in your desired rate early guarantees that your rate does not rise during your loan application process.

 

You should also consider the rate environment when you are choosing a type of mortgage product to finance your home purchase.  Even though their introductory rates may seem very attractive, if you opt for an adjustable rate mortgage (ARM), you may be slammed with a huge rate increase in the future when your rate adjusts if rates continue their upward climb.  Because of this, a fixed rate mortgage may be the smarter choice if rates continue to rise.  To stay on pace with current mortgage rate trends, refer to online rate trending graphs and check national averages regularly.

 

Even though rates are rising, locking in a rate early and choosing the correct mortgage product should help reduce some of the risk associated with getting a mortgage in the current rate environment.  You should always be sure to shop around to find the best rates and terms that meet your needs.  Find the best deal locally by searching online rate tables.  Be sure to consult your loan adviser to ensure you are getting the best rate and product for your individual situation.