What To Do When Your Mortgage Rate Lock Expires

What Happens When You Are Refinancing and Your Mortgage Rate Lock Expires

Note: Total Mortgage provides all borrowers with written mortgage rate locks and is extremely careful to lock your rate for a period that is longer than the time it will take to process your loan. While there are occasions where rate locks expire due to circumstances beyond the control of both Total Mortgage and the borrower (e.g. an unexpected title insurance issue), Total Mortgage makes every effort to close your loan within your rate lock period.

When most home owners submit an application to refinance their mortgage, they do not pay too much attention to the terms of their mortgage rate lock. Most borrowers wanting to lower their mortgage payement, focus on what mortgage rate they are getting, how many points they are paying if any, and what their total closing costs will be. With the current turbulent interest rate environment, however, it is important to understand what options are available if your interest rate should expire before you are able to close your loan.

(If you are unfamiliar with how rate locks work, see our article about mortgage rate locks.)

Mortgage rate lock requirements

Mortgage lenders in most states are required to lock your loan for a period that is at least equal to the amount of time that they expect to process and close your loan. When you lock your mortgage interest rate with your lender, you are required to provide requested documents to your lender within a timely manner ("timely" is defined in some states and not defined in others). In addition, your closing attorney or title agent must also provide documents in a timely fashion as well. Most interest rate lock terms and conditions specify that if you fail to do so your rate lock can be voided.

What New Regulations Mean For Mortgage Rate Locks

New truth-in-lending regulations could also delay your loan from closing on time. The new rules require that if there are any changes to your loan closing costs then the lender must re-issue a closing cost estimate and the borrower must have a specified number of days before closing to review the documents and costs.

Unexpected delays can cause your mortgage rate lock to expire

Combined with the required three day right of rescission after closing, a borrower and lender could be forced to wait up to ten days to close and fund a loan from the time even a small change occurs to the closing costs. This applies even if the change is mutually agreed upon by the borrower and lender. For example, a borrower might have locked into a rate of 5% with one point but when their loan was reviewed by underwriters was told they could only be approved at a rate of 4.75% with 2 points. This delay is an example of where a small change could create the ten day delay and cause the rate lock to expire.

So what do you do if your mortgage rate lock expires?

If mortgage rates are the same or slightly better, there is no problem as your lender can give you an extension at no cost. If mortgage rates are higher, you will have to find out if your lender has a rate lock extension policy. Most mortgage lenders will extend an interest rate for a small cost. If the delay was outside the control of your lender, you will be responsible for that cost. If the delay was caused by the lender, however, you may be able to require that they give you that extension at no cost. Be sure to read your rate lock agreement before you get close to your expiration date and make sure to get your documents in on time.

For an exact refinance rate quote and a rate lock you can rely upon, complete a free rate quote request now!.

To see the current mortgage rates, visit our Current Mortgage Rates page.

If you have any questions that you would like to get answered by our expert mortgage brokers, please email us or call us at 1-877-868-2503.

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