What is a Rate Lock?
A rate lock is a lender's guarantee that a specific interest rate and point combination will be available to you for a defined period, regardless of market rate fluctuations. When you lock your rate, the lender commits to honoring that rate even if market rates increase before your loan closes. In exchange, you commit to closing within the lock period — typically 15 to 60 days.
Rate locks matter for real estate investors because mortgage interest rates can change daily, and even small rate movements affect deal economics. A 0.25% rate increase on a $200,000 investment property loan adds roughly $30/month to the payment. On a rental property where cash-on-cash return is measured in hundreds of dollars per month, that $30 swing can meaningfully change whether the deal pencils.
How rate locks work
After your loan originator quotes you a rate, you can choose to lock it or float. Locking freezes the rate. Floating means your rate will be whatever the market rate is when you eventually lock or close. Most borrowers lock within a few days of application, especially in rising rate environments.
The lock is documented in a rate lock confirmation that specifies: the interest rate, the discount points (if any), the lock expiration date, the loan amount, and the property address. This document is your proof that the lender committed to these terms.
Lock periods typically range from 15 to 60 days, with 30-45 days being the most common for purchase transactions. Shorter lock periods generally come with slightly better rates because the lender's risk of rate movement is lower. Longer lock periods cost more — either a slightly higher rate or additional points — because the lender bears more risk.
Lock period options
| Lock period | Best for | Rate impact |
|---|---|---|
| 15 days | Refinances, quick closes | Best rate available |
| 30 days | Standard purchase transactions | Standard pricing |
| 45 days | Purchases needing extra time | Slight premium (~0.125%) |
| 60 days | New construction, complex deals | Higher premium (~0.25%) |
What happens if your lock expires
If your loan doesn't close before the lock expiration date, you have two options: extend the lock or re-lock at current market rates. Lock extensions typically cost 0.125% to 0.375% of the loan amount per extension period (usually 7-15 days per extension). If rates have risen since your original lock, the extension cost still beats re-locking at the higher rate. If rates have dropped, you may be better off letting the lock expire and re-locking at the lower rate.
For investors, lock expirations are most commonly caused by appraisal delays, title issues, or slow underwriting on complex files with multiple properties. Building a buffer into your lock period (locking for 45 days on a 30-day closing timeline) reduces the risk of needing an expensive extension.
Float-down options
Some lenders offer a float-down provision that allows you to reduce your locked rate if market rates drop significantly before closing. Float-down terms vary by lender but typically require a minimum rate decrease (0.25-0.50%) and may carry a fee (0.25-0.50 points). The float-down protects you from rate increases (you're locked) while giving you partial benefit from rate decreases.
Float-down options are most valuable in volatile rate environments where rates could move significantly in either direction. In stable rate environments, they add cost without much benefit. Ask your lender about float-down availability and terms before locking.
Strategy for investors
Active investors doing multiple deals should develop a rate lock strategy rather than making ad hoc decisions. In rising rate environments, lock early and lock tight. In stable or declining environments, floating longer may save money. For flip projects where the holding period is short, even small rate differences are less impactful because the total interest paid over a 6-month hold is minimal regardless.
For buy-and-hold investors getting permanent financing, the rate lock decision is more consequential because the rate persists for years. Locking a 30-year fixed-rate mortgage at 7.0% versus 7.25% saves about $35/month per $200,000 borrowed — that's $420/year and $12,600 over the life of the loan.