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Key takeaways
- A mortgage rate lock extension fee is a charge you pay to retain the interest rate you were initially quoted after the original lock period expires.
- A lock extension fee typically costs a few hundred dollars, but it can vary by lender, the reason for the extension and other factors.
- To avoid paying an extension fee, keep on top of your mortgage application and communicate regularly with your lender.
What are mortgage rate lock extension fees?
A mortgage rate lock extension fee is a charge you’ll pay to extend the interest rate lock period on your mortgage. During this period, your lender agrees to honor your initial quoted rate. If you don’t close the loan within that time frame, you’ll be quoted a new rate, which could be higher or lower than your initial rate depending on prevailing market rates.
If you were to get a loan estimate for a $400,000 mortgage at 6.8 percent, for example, the lender might allow you to lock in that mortgage rate for up to 30 days. As long as the transaction closes during that period, you’ll get that promised rate. If your loan doesn’t close by the end of that window, your lender might charge you an extension fee to keep that lower rate while you finalize the deal.
In most cases, the extension fee only applies if you were responsible for the closing delay. If the lender caused the delay, most won’t charge a fee.
Outside of any delays, some borrowers opt to pay for an extended rate lock anyway when they get preapproved for the mortgage. This might make sense for you if you expect your home search to take longer than usual and rates to rise in the interim.
How long do mortgage rate locks last?
Initial mortgage rate locks typically last 30 to 45 days, but some lenders allow a period of anywhere from 60, 90 or even 120 days with no fee. Before locking your rate, confirm your lender’s policy.
How much are rate lock extension fees?
A rate lock extension fee runs anywhere from 0.25 percent to 1 percent of your loan principal, but it’s often charged as a flat fee instead of a percentage. Guild Mortgage, for example, charges $1,500 for a 120-day lock, while Pennymac charges $595 for your choice of a 60-, 75- or 90-day lock.
Some lenders base the cost on the reason for the extension. Better, for instance, charges 50 percent of the extension fee to the borrower if the closing delay was caused by a third party, like the appraiser or settlement company. It’ll charge you the full fee if you alone caused the delay.
Not every lender charges an extension fee, however, and some offer more creative lock options. Navy Federal Credit Union, for instance, provides a 60-day lock with the option to relock the rate up to two times in that window, at no cost.
How to avoid mortgage rate lock extension fees
While lender or third-party delays are out of your control, you can take steps to ensure your loan stays on track and closes within the first rate lock window, including:
- Understand your lender’s rate lock policy. Find out how your lender handles rate locks and extension fees. Ask about the cost, timelines and for a copy of the fine print. Note that some lenders offer a “float-down” option, which allows you to get a lower rate if prevailing rates fall after you initially lock.
- Think through your closing timeline. You might not know exactly when you’ll have a signed home purchase agreement, but you can give yourself enough time to shop for homes and make offers. When determining your closing date and when to lock, consider how fast homes are moving in your market. Also, consider whether you’re on a deadline (such as relocating for work) and general mortgage rate trends. If your offer has been accepted, consider the seller’s timeline, too.
- Avoid taking out a new credit card or other big financial moves. During the mortgage underwriting process, don’t make any major changes to your credit or finances. If your credit score or debt-to-income ratio change, for example, your lender might void the initial rate lock.
- Stay in contact with your loan officer. While it’s normal for there to be quiet periods during underwriting, a good loan officer should keep you informed of status updates or additional questions. Keep all the documents you submitted to get preapproved on hand so you can respond quickly if they need more information.
- Negotiate if needed. If the seller is causing a delay — say they need more time to find another place — ask them to cover the rate lock extension fee.
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