Locking In Mortgage Rates for Refinancing

by Tim in Marshfield, WI and by Mark in Saginaw, MI

Ask Kate about locking mortgage rates and refinancing: Because Tim's lender is hesitant to lock due to appraisal backlogs, he asks me about his risks to locking in an interest rate. Mark asks me if his lock terms seems legitimate because after his appraisal, the discount points were $1800 higher.


Question 1: Mortgage Rate Lock Expiration Issue

By Tim in Marshfield, WI

The current rates have led my wife and I to refinance, but we have run into a problem. We would love to lock in our rates, but the lender tells us she is hesitant to lock in because the appraisers are so busy that the rate lock may expire before they complete the work.

She also mentioned our loan to value ratio is very close to a mark that could get us a lower rate if our appraised value goes up. Besides rates dropping (which is not a concern for us), are there are risks to rate locking?

***zz-portrait-left.shtml*** Ask Kate answers: Mortgage Rate Lock Expiration Issue

Hi Tim,

It sounds like your lender is in touch with her market. If so, I'd pay attention to her concerns about the time scenario.

But you might also ask how much an extended lock-in period would cost. Maybe this is a decent solution to locking in current rates during sluggish appraisal turn around times.

There are 2 main risks to locking in your mortgage rate:

1. Mortgage rates may come down further. I made a practice of warning my customers this could happen. I'd politely ask them not to shoot the messenger if interest rates decreased after they locked.

Ask to review the mortgage company's lock-in agreement. See if your lender provides a float down provision in case interest rates significantly improve. But sometimes float downs are costly. Now is the time to find out.

Go here for questions to ask your lender about floating down mortgage rates.

2. Locked mortgage rates expire. As your lender pointed out, rate lock agreements have expiration dates. As soon as you lock, the clock is ticking.

The lock-in period must be long enough to get your transaction funded. With a 3-day right of recession, mortgage refis need expert timing.

You can read other Ask Kate letters about the 3-day right of recession at... Also review the lock-in agreement to see what happens if your locked rate were to expire. Re-locking your mortgage rate might not be as simple as you think.

You may not be entitled to a lower rate, even if the market has improved. Or you may have to pay a fee to re-lock.

For more details on rate lock agreements, go to Nitty Gritty Mortgage Interest Rate Lock. Then follow the links through my rate lock series and related questions and answers.

Best wishes,


Question 2: Is my mortgage rate lock legit?

By Mark in Saginaw, MI

Kate, I'm in the midst of a harp refinance. I have a Good Faith Estimate and rate lock given at 4.125% with an eighth of a point being charged. After our home was physically appraised I received a new worksheet that jumped me over a point in discount fees raising the overall cost by about $1800.

I have questioned this and am told it's due to the loan-to-value (about 112%) being in excess of the originally estimated 100%. I see nothing stating that the rate locks but points float.

Does this sound legit? It's with my current lender and I had thought sticking with them would simplify things but will move on if need be.

***zz-portrait-left.shtml*** Ask Kate answers: Is my mortgage rate lock legit?

Hi Mark,

When your appraised value unfortunately came in lower, the increased loan-to-value raised your mortgage rate.

But your lender must be expressing this by increasing the discount points, prepaid upfront interest, in contrast to your mortgage rate which spreads out (amortizes) the cost of interest over the term of your loan.

The relationship of interest rates to discount points is like opposite sides to a balloon. Squeeze one side, the other pops out. Read more at Mortgage Broker Fees, Mortgage Points, And Mortgage Fees.

In your case, raising the points retained the quoted mortgage rate. But you can also ask about keeping the cost of discount points down by raising the rate. However this becomes a pick-your-poison situation.

So at this point, you are probably asking why you bothered locking in. Rate lock agreements are conditional for borrowers. As you are finding out, all it takes is a change in your circumstances to raise the mortgage rate after locking.

Perhaps it would alleviate (or confirm) your suspicions if you shopped around a little for an estimated mortgage rate at an hypothetical loan-to-value of 112%.

But another lender's verbal quote is just that. A quote. I wouldn't hang my hat with too much confidence on one.

Many homeowners have questions about refinancing. Here is a potpourri of questions and answers: Mortgage Refi Tips and Answers.

Best wishes,


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