Most lenders will agree to lock the rate and other terms that they quote you for a 30 day period. For a nominal fee or slight interest-rate increase lenders will typically, to hold the rates for 45 to 60 day period. The obvious benefit is that this commitment of rate lock gives you peace of mind. It guards you against inflation in the next few days you take to make up your mind.
What you’re doing is that you’re paying the mortgage lender a certain amount to take on the risk of something happening in the economy that could increase the cost of the loan. Locking a rate on the mortgage is analogous to buying insurance.
The cost of purchasing a 60-day rate lock is in the range of 1/8 to 1/4 of additional points. On a $200,000 mortgage this could work up to $250-$500.
For peace of mind and when you are getting a good interest rate, it makes sense to block it. Compare it to a situation where the rate increases by .5% by the time you make up your mind.
Over a 30-year mortgage for $200,000 an increase of .5% means that you would be paying approximately $24,000 more. This is a lot more compared to the initial $250 – $500 fee.
Be sure to get the lender’s written commitment to the rate lock. Verbal assurances should be considered completely worthless.