Benefits

• If interest rates increase over the lock-in period, the borrower will save money on interest payments. In addition, a lender can agree to allow the borrower to purchase a set number of points, upfront sums of money used to reduce closing costs and interest rates. Home loan borrowers may want to use a mortgage lock-in to use as leverage to try to get a better rate with other mortgage vendors or to shop around for a lower interest rate.
  
  

Considerations

• Consumers will have difficulty proving oral lock-in agreements if the lender tries to change promised terms. Borrowers should always have the lender provide them with a written statement that lists lock-in fees, the time limit of the lock-in and the promised interest rate and points to prevent miscommunication or duplicity on the part of the lender. Should the lender break the agreement, the borrower can seek compensation for damages through a lawsuit.
  
  

Time Frame

• The amount of time that a lender will lock in a rate varies depending upon the lender but can last for as short as seven days or as long as 120 days after a bank approves a loan. According to the Federal Reserve Board, lenders typically offer potential borrowers a lock-in period that lasts between one and two months.
  
  

Fees

• In order for a borrower to lock-in a mortgage rate, lenders usually charge him a set fee or a percentage of loan principle that varies depending upon the lender. A loan processor may require the borrower to pay this fee upfront when he submits an application or after the borrower receives approval for a mortgage. For example, Teacher's Federal Credit Union requires borrowers to make upfront payments of one-half point ($1,000 on a $200,000 loan) for a 30-day lock-in and 1 1/2 points ($3,000 on a $200,000 loan) for a 90-day lock-in as of April 2011. According to the Federal Reserve Board, some lenders will refund the lock-in fee if the borrower closes on a home.
  
  

Warning

• If the borrower does not accept the loan terms within the lock-in period, he might lose the quoted interest rates and points. If interest rates increase, lenders will charge a higher interest rate on the loan. If the lock-in agreement requires the borrower to accept the home loan within the lock-in period, the lender can sue the borrower if she doesn't live up to her obligations.