Yale Roth M.A., M.Ed

Who Pays When Your Mortgage Rate Lock Expires?

This is a big mortgage rate lock question.

First, you need to know that when you lock a mortgage rate, the mortgage rate lock is for a specific period of time, either 30 days, 45 days or 60 days.

Now what happens once the mortgage rate is locked and you don’t close on the loan within that time period.

The answer is it depends.

The first critical thing you need to consider is where are mortgage rates at the time of expiration.  Have mortgage rates gone up since you locked the mortgage rate?  Have mortgage rates gone down since from the time you originally locked your rate?

If mortgage rates are higher at the time your mortgage rate is set to expire, then you have a couple of options.

The first option is to “extend” the mortgage rate lock.  This needs to be done before the mortgage rate lock expires.

To do this costs money.  It’s called a mortgage rate lock extension fee.  It can range from .125% to .375%, depending on how many days the mortgage rate needs to be extended.

Remember, the .125% – .375% is to fees, not to the locked in rate.  So, if you’re loan amount is $100,000, the rate lock extension fee can range from $125 to $375.

The second option is to let the mortgage rate expire and relock the mortgage rate.  However, if you do this, you will be subject to worse case pricing.

What that means is that if you let the mortgage rate expire and mortgage rates are higher at that time, you will be subject to the higher rates.

Alternatively, you can keep your original mortgage rate but pay the lender more money for itas the mortgage bond market has deteriorated and the cost to get that original mortgage rate is now higher.

If mortgage rates are lower, then you can keep your original mortgage rate at the original price.

So worst case means that the borrower is subject to worse case at the time of mortgage rate expiration date.

Now if the lender “dropped the ball” in terms of not processing or underwriting the loan in a timely manner, the lender will usually pay for the mortgage rate lock extension fee.

If you – the borrower – dragged your feet – and didn’t provide the lender with any requested documentation in a timely manner, the lender will usually impose the mortgage rate lock extension fee on you.

If the transaction is a refinance, and you threaten to walk away from the transaction, the lender may come back and pay for the mortgage rate lock extension to save the deal – it just depends on the lender you’re working with.

In conclusion, if the mortgage rate lock expires, then you have a couple of options: pay the rate lock extension fee, have the lender pay the mortgage rate lock extension fee, let the mortgage rate expire and relock the rate at worst case pricing, or walk away from the deal and go to another lender.

Related Posts:

• Mortgage Rate Questions – “Are The Mortgage Rates The Same For A Cash Out Refinance?”
• Mortgage Rate Questions – “Can I Lock My Mortgage Rate Over The Weekend?”
• Mortgage Rate Questions – When Do Mortgage Rates Change?
• Mortgage Questions Video – “How To Shop For A Mortgage Rate”?
• Mortgage Services Money Talks – Where Can You Find The Lowest Mortgage Rates?