If you`re in the market to purchase a home, you`ve probably heard the term “locked in interest rate agreement” thrown around. But what exactly does it mean, and is it worth considering?
A locked in interest rate agreement is when a borrower and lender agree to a specific interest rate for a specified period of time, typically 30, 60, or 90 days. This agreement is typically made during the mortgage application process, and once the interest rate is locked in, it cannot change, even if market conditions shift.
The benefits of a locked in interest rate agreement are pretty straightforward: you know exactly what your mortgage payments will be for the specified period, regardless of any fluctuations in interest rates. This can give borrowers peace of mind and help them budget effectively throughout the home buying process.
Additionally, locked in interest rates can be particularly useful if interest rates are expected to rise in the near future. By locking in a low rate, borrowers can guarantee they won`t be subject to higher payments down the line.
However, it`s important to note that there are some potential downsides to consider as well. For example, if interest rates drop after you`ve locked in a rate, you won`t be able to take advantage of the lower rates. Additionally, if you`re unable to close on your mortgage within the specified period, you may need to negotiate a new rate (which could be higher).
Overall, whether or not a locked in interest rate agreement is right for you will depend on your specific circumstances and the state of the market. It`s always a good idea to talk to your lender and explore all your options before making a decision.