Mortgage interest rates change daily, meaning the mortgage interest rate you see when you first apply for your mortgage preapproval or approval may not be the same rate you end up with at closing. That’s why mortgage rate locks exist. Simply put, a mortgage rate lock freezes your interest rate until the loan closes and protects you from rising rates.

Learn more: Strategies for getting the lowest mortgage rates

In this article:

What is a mortgage rate lock?

When to lock in a mortgage rate

How long can you lock in a mortgage rate?

Pros and cons

How to lock in a mortgage rate

Should I lock in my mortgage rate?

Lenders with unique rate lock programs

FAQs

A mortgage rate lock is a commitment from a mortgage lender guaranteeing that the interest rate on your home loan will remain the same until the day you close on the house — provided the mortgage closes within the specified time frame and there are no changes to your loan application. With a mortgage rate lock, the home buyer can keep the lower rate even if market rates go up.

However, if rates go down when you close on the mortgage loan, you could be stuck with a higher rate. A float-down option takes away that risk. Some mortgage lenders offer rate locks with float-down options, so you can still get a new rate if mortgage rates dip below your rate lock. It typically isn't free, though, and most lenders will charge you 0.5% to 1% of the loan amount. It will only make financial sense to exercise a float-down option if rates drop low enough to justify the cost.

The answer to when you can lock in your rate depends on the mortgage lender. Typically, you can lock in a mortgage rate at any time after you’ve been approved for the home loan and up to five days before closing. A lender might include a rate lock in the Loan Estimate, which it provides within three days before closing. Some lenders allow you to lock in a rate at other times, such as when you are preapproved.

But with all of these options, when exactly should you lock in a rate? The short answer is: Pay attention to market dynamics.

If interest rates have been stable, locking in your rate early may not be necessary. If rates are falling and are likely to continue in that direction, you may want to wait a bit before locking the rate, since you could get a better rate in a few weeks.

However, if interest rates are rising or unpredictable, and you’re worried you won’t be able to afford your mortgage with a higher interest rate, it’s worth doing a mortgage rate lock as soon as possible.

Current mortgage rates fall into that second category: unpredictable (well, relatively). Rates have been decreasing for a few weeks, but it’s unclear whether the September federal funds rate cut will push mortgage rates even lower. There’s also a lot of political and economic uncertainty right now. Keep an eye on rates, and if they start to trend upward, feel free to lock in a rate with a lender.

Dig deeper: How much house can I afford? Use the Yahoo Finance affordability calculator.

Depending on the lender, you can typically lock in a mortgage rate for 30, 45, or 60 days — sometimes even longer. As long as you close within the specified time frame, your mortgage rate won’t change.

But if your rate lock expires before you close on the loan, you’ll have to pay a fee to extend the period of time. The interest rate lock extension fee is typically a percentage of your loan amount. The longer the extension, the higher the cost.

Read more: 6 tips for choosing a mortgage lender

If you’re unsure whether locking in your mortgage rate is the right move, weigh these pros and cons to help you make an informed decision.

Protects you from interest rate hikes

You can typically choose from various lock periods, such as 30 or 60 days

Gives you peace of mind

Makes it easier to budget for your home and monthly payments since your interest rate is set

You could miss out on a lower interest rate if you don’t have a float-down option

You may have to pay extra to extend the lock after the expiration date

Many lenders charge rate lock fees

Learn more: What determines mortgage rates?

A mortgage rate lock can be helpful if market rates are trending up before your closing date. Take the following steps to lock in your mortgage rate:

Shop around. Before locking in your mortgage rate, submit mortgage preapproval applications with at least three different mortgage lenders so you can compare potential offers. Besides interest rates, you’ll also want to compare things like down payment requirements, origination fees, rate lock periods, and float-down options.

Find a home and make an offer. While many lenders allow you to lock in the mortgage rate any time after you’ve been approved for the home loan and up to five days before closing, you may have to pay extra to extend the lock if the rate lock expires before your loan closes. So, it might be best to start house-hunting and make an offer on the home you want before locking in a rate.

Contact your lender. When you’re ready for a mortgage rate lock, reach out to your lender to select the mortgage rate lock period you want and fully understand your options.

Learn more: How long does it take to close on a house?

We don’t have a crystal ball to tell you when mortgage rates will go down or whether it’s a good idea to lock in your mortgage rate today. Mortgage rates have been declining, but there’s no guarantee that they will continue doing so.

Rates have been going down in anticipation of the Federal Reserve cutting its rate, as well as economic issues such as a cooling labor market. Economic data is constantly being released that could swing mortgage rates one way or the other — so it could be a good idea to lock in a rate soon, while they’re relatively low.

What if rates continue trending downward, though?. That’s why it’s useful to ask potential mortgage lenders about any float-down options. You’ll pay money to activate your float-down option, but at least it gives you the option to get a lower rate even after locking one in.

Dive deeper: Mortgage rate predictions for the next five years

The best mortgage lenders offer unique rate lock programs to attract customers. Here’s how some of them work.

Newrez’s Lock & Shop Program. Newrez has a program that locks your interest rate for 45 days while you search for your new home. If rates drop during this period, the lender even lets you relock to get a lower rate at no extra cost.

Embrace Home Loans’ two float-down options. Embrace Home Loans allows you to lower your interest rate two times instead of one, up to 15 days before closing. Each float-down option costs 0.25% of your total loan amount.

Navy Federal Credit Union’s Special Freedom Lock. Navy Federal Credit Union mortgages offer a float-down option called Special Freedom Lock that lets you float down twice, but the total rate reduction cannot surpass 0.50%. Navy Federal doesn’t charge any fees when you exercise your float-down option unless you extend it past the 60-day rate-lock period.

Third Federal Savings & Loan. You lock in your rate for 60 days with Third Federal mortgages. The lender even has a 360-day rate lock if you provide 1% of your loan amount up-front as a deposit.

Read more: The best mortgage lenders for first-time home buyers

If you’re locked in and mortgage rates fall, you’ll be stuck paying the higher rate unless your rate lock includes a float-down option. A float-down option lets you honor your locked-in rate or the current rate, whichever is lower. This option isn’t free, though. You can expect to pay between 0.5% to 1% of the loan amount when you use a float-down. For a $350,000 loan, that's $1,750 to $3,500.

Locking in your mortgage rate is typically worth it when rates are rising or unsteady, and you want to protect yourself from paying a higher rate at closing. If mortgage rates increase after you’ve locked in the rate, you still get to keep your lower rate.

Lenders typically charge anywhere from 0.25% to 0.5% of your loan amount to lock in a mortgage rate. So, if you take out a $300,000 mortgage loan, you can expect to pay $750 to $1,500 for a mortgage rate lock.

Laura Grace Tarpley edited this article.

In 2021, the average 30-year mortgage rate fell below 3%, but now, according to Freddie Mac, it’s well over 6.5%. If you’re in the market for a mortgage loan, you may be wondering if you should wait until interest rates fall significantly before buying a house. When will mortgage rates finally drop back down near the 3% mark?

Read more: Is 2025 a good time to buy a house?

In 2020 and 2021, Americans witnessed record-low mortgage rates. The lowest 30-year fixed rate was 2.65% in January 2021, but rates hovered at or below 3% for roughly a couple of years. However, home loan rates probably won’t drop back down to 3% — at least not anytime soon.

To grasp why rates are unlikely to return to 3%, it helps to understand two things: the circumstances that initially drove the drastic drop in interest rates and the factors behind today's higher rates.

Learn more: Mortgage rate predictions for the next five years

Home loan interest rates reached historic lows in 2021 as the Federal Reserve aggressively cut rates to mitigate the effects of the COVID-19 pandemic.

The pandemic impacted the economy in several ways, including widespread unemployment and supply shortages. To encourage spending and avoid a major recession, the Fed began lowering the federal funds rate in March 2020, making it cheaper to borrow money as Americans faced job losses.

Although many factors influence home loan rates, mortgage rates typically follow the general direction of the federal funds rate. And by late December 2020, the average rate for a 30-year mortgage was even lower than 3% at 2.66%.

Dig deeper: How the Federal Reserve rate decision affects mortgage rates

Lower interest rates and pandemic-relief stimulus programs increased consumer demand, one of several factors that drove the inflation rate.

The Federal Reserve monitors this rate, which measures the price change for goods and services, aiming to keep it around 2% according to yearly changes in the price index for personal consumption expenditures (PCE).

By 2022, the PCE inflation rate was over 5%, and the Fed began a series of fed funds rate hikes to curb it. The central bank raised its rate 11 times combined in 2022 and 2023. Mortgage rates followed suit, peaking at 7.79% in October 2023 before hovering around 6.6% at the end of the year.

Many experts expect 30-year mortgage rates to stay above 6% in 2025, anticipating a slight drop if they fall at all. Rates may decrease more in 2026, but economists still expect them to remain above 6% next year.

Whether we see lower rates depends on several economic factors. Here are just a few.

Inflation: Higher inflation can lead to higher mortgage rates if the Federal Reserve responds with a rate hike or even by keeping the fed funds rate unchanged.

Unemployment: High unemployment can cause demand for homes to fall, which could lead to lower mortgage rates.

10-year Treasury yield: Mortgage rates tend to follow the direction of the 10-year Treasury yield. Unlike the fed funds rate, the 10-year yield is a greater indicator of rates on longer-term loans — like home loans. Generally, investors buy more Treasury bonds as a safety net during economic uncertainty, which lowers yields and, ultimately, mortgage rates.

Keep reading: When will mortgage rates go back down to 4%?

Buying a home generally makes more sense when it fits your budget and goals than if you try to time the real estate market.

"Finding the right time to buy is not a science, and there are a lot of factors beyond just rates buyers should consider,” Beverly Hankinson, mortgage loan advisor manager at Frost Bank, said via email. “A term that’s become popular is, 'date the rate, marry the house.' If the home checks all your boxes, buying could make sense, especially if you can refinance in the future."

Current homeowners should factor in more than the interest rate when considering a mortgage refinance.

"If you are currently locked into a higher mortgage rate, it could be a good opportunity to explore a refinance,” noted Hankinson. “However, refinancing comes with a cost, so it’s important to weigh your monthly savings against other factors, including how long you plan to stay in your home. For example, if you plan to move for more space in the next two to three years, it might not make sense to pay the refinancing costs."

Dig deeper: Do mortgage rates go down during a recession?

Although you can’t control when mortgage rates fall, there are steps you can take to ensure you get the lowest mortgage rate possible.

Boost your credit score: You’re more likely to get a lower interest rate with a higher credit score. Improve your score by making on-time payments on credit cards and other debts and resolving errors on your report.

Pay down debt: Reducing your debt lowers your debt-to-income ratio (DTI ratio), a factor mortgage lenders consider when determining your loan eligibility and what rate you qualify for.

Compare multiple lenders: Apply for preapproval with more than one mortgage lender to compare interest rates, repayment terms, and discounts.

Negotiate fees: Pay attention to closing costs and ask your loan advisor if there’s an opportunity to waive or reduce some fees.

Learn more: You locked in a low mortgage rate. Now you want to move — What should you do?

It’s unlikely you’ll see a 3% mortgage rate anytime soon. According to Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage is well over 6%. Mortgage rates hit historic lows in 2021 due to the Federal Reserve’s response to the COVID-19 pandemic.

Some experts say mortgage rates could fall slightly in 2025, but don’t expect a significant drop in 30-year fixed-rate mortgages, which have lingered between 6% and 7% since the fall of 2022.

Timing the housing market can be difficult, especially when so many factors go into buying a home or refinancing. Generally, you should buy a house when you find the right one and it makes financial sense — you have enough saved for the down payment and can afford the monthly mortgage. Refinance when you can lower your interest rate or land better loan terms, like moving from an adjustable-rate to a fixed-rate mortgage.

This article was edited by Laura Grace Tarpley.

Mortgage rates are lower than this time last year, but they're still nowhere near the 3% range we saw in 2020 and 2021. However, there is a way to lower your mortgage costs: a buydown interest rate.

With this method, you pay more at closing to lower your mortgage interest rate. While it costs more money up front, it can lead to greater savings over the life of the loan. But it’s a more beneficial tactic if you plan to stay in the home for a while — the longer you keep the mortgage, the more you’ll save by buying down the rate.

While there are perks to having a lower mortgage rate, there are also factors to consider before buying down your interest rate.

In this article:

What is buying down your interest rate?

Types of mortgage rate buydowns

How much does it cost to buy down your interest rate?

Pros and cons

How to pay for a mortgage rate buydown

FAQs

When you buy down your mortgage rate, you pay extra money at closing to purchase points that essentially lower your interest rate.

Different lenders have their own mortgage rate buydown programs, so there might be a slight difference in the calculation and loan terms. Be sure to ask several mortgage lenders how their buydown programs work to help you decide which loan is right for you.

There are two ways to buy down your mortgage. “Discount points” refer to buying down your rate permanently, and a “mortgage buydown” does so temporarily. These two terms both refer to ways to buy down your rate and are often used interchangeably, but there are important differences.

There are two main types of mortgage rate buydowns: a permanent or temporary buydown. As implied, the permanent buydown rate lasts for the life of the loan, while the temporary option is only for the first few years or less. Then, there are a few kinds of temporary buydowns.

With a permanent buydown, the lower rate you purchased with discount points when you first got the mortgage will last for the duration of the loan as long as you don’t refinance the mortgage or change the terms. Permanent buydowns are usually purchased by the home buyer.

Most lenders will only allow you to buy points for 1% to 2% of the mortgage amount, which typically lowers your rate by 0.25% and 0.50%, respectively. But some will go to 4%, which could lower your mortgage rate by 1%.

A temporary buydown, or “mortgage buydown,” is when your interest rate is lower for a set period of time — usually one year to three years — then resets to a higher rate for the remainder of the loan.

This type of buydown can be paid by the buyer, seller, home builder, or even a lender in some cases. These are usually paid through an escrow account.

With a 3-2-1 buydown, the rate typically increases by 1% yearly. For example, if market rates are 6%, you could get a temporary buydown in which the rate is 3% the first year, 4% the second year, 5% the third year, and then resets to 6% the fourth year.

With a 2-1 buydown your rate is lower for the first two years, then resets the third year. With a 2-1 buydown on a 6% rate, you would pay 4% the first year and 5% the second year, then the 6% rate would kick in on year three.

With a 1-0 buydown, your rate is 1% lower for the first year and then resets to the normal interest rate for the second year and beyond.

In all these cases, the ideal outcome is that market rates will be lower by the time your temporary rate resets, and you can refinance into that lower market rate. This is betting on future mortgage rates, so weigh the risks before committing.

It’s essential to ask your mortgage lender about any temporary buydown programs because each lender will have different options.

Looking for a mortgage lender with a buydown program? Read Yahoo Finance's reviews of lenders that offer these types of lenders:

AmeriHome mortgage review

CMG Financial mortgage review

Embrace Home Loans review

Pennymac mortgage review

PHH Mortgage review

TD Bank mortgage review

Are you interested in buying a new construction home? Then, you may benefit from a builder buydown. In this case, the builder (not the borrower) pays the lender so the borrower can get a lower interest rate.

Builder buydowns can be either permanent or temporary. Not all builders offer this incentive, but many do. According to the National Association of Home Builders (NAHB), around 60% of builders have been offering some sort of buyer incentives. The hope is to entice home buyers who are hesitant to buy due to high interest rates and to offset some of the company's building costs.

Keep in mind, builder buydowns are for people getting a mortgage to buy a new construction home, not for people building houses with construction loans.

The cost to buy down your mortgage rate will vary based on the lender and your total loan amount. But you should plan to have at least several thousand dollars set aside. Keep in mind, this money is in addition to any down payment required on your mortgage and will be paid at closing as part of your closing costs.

In general, one discount point — or 1% of the mortgage amount — equates to roughly a 0.25% reduction in your mortgage rate.

So, let’s say you are offered a $400,000 mortgage with a 7% rate. If you pay $4,000 (which is 1% of your mortgage) to buy a discount point, it could reduce the mortgage rate to around 6.75%. That means you’re lowering your monthly mortgage payment from an estimated $3,028 to $2,961, saving more than $67 a month, excluding the down payment, taxes, and other fees. Over a span of 30 years, you could save more than $24,000 with the lower mortgage rate.

But your savings is based on how long you keep that loan, so it might not be worth it if you plan to sell the house in a few years.

In the case of a temporary buydown, like a 3-2-1, the savings only occurs in the early years. However, it could extend beyond the initial years if market rates are lower by the time the buydown period ends and you can refinance into a lower rate.

Let’s use the same example of a $400,000 mortgage with a 7% mortgage rate, resulting in roughly a $3,028 monthly mortgage payment. With a 3-2-1 buydown, here’s what you would pay for the first three years:

Year 1: A 4% rate with a $2,276 monthly payment, saving you $752 per month

Year 2: A 5% rate with a $2,514 monthly payment, saving you $514 per month

Year 3: A 6% rate with a $2,765 monthly payment, saving you $263 per month

Based on the monthly estimates, you could save $9,024 the first year, $6,168 the second year, and $3,156 the third year, totaling more than $18,300.

Read more: How much house can I afford? Use our home affordability calculator.

Before paying more up-front to get a lower mortgage rate, consider these advantages and disadvantages of a mortgage rate buydown.

Your monthly mortgage payments will be slightly lower.

You save more in interest over the life of the loan.

If it’s a temporary buydown, you could earn significant savings during the early years of the loan.

You might qualify for a larger mortgage amount if your interest rate is lower because it would reduce your monthly mortgage payments. Lenders approve a total amount based on how much you can afford partly based on your monthly debt-to-income ratio. For example, you might be able to afford a $400,000 loan at a 5% rate because the monthly payments could be about $500 less than the same loan amount at a 7% rate.

Buying down a rate requires cash up-front, so you will have less savings after closing day.

Your closing costs will be higher.

You won’t save as much if you sell the house within a few years than if you stay in the house for a long time, because you might not have time to recoup the extra money you paid at closing for the buydown.

You’ll have higher monthly mortgage costs later if it’s a temporary buydown.

Learn more: When will mortgage rates go down?

There are several common ways to pay for a mortgage rate buydown:

Pay more at closing. If you have extra cash after meeting the down payment requirement and other closing costs, you can pay to buy down your rate. Just be sure you don’t totally deplete your savings while moving into your new home. Do the math ahead of time, and check that you can make the monthly mortgage payments after buying down your rate.

Ask the home builder. With new construction homes, some builders will offer to buy down your rate to incentivize you to purchase their home. This may happen if they have their own partner lender, which helps them streamline the entire mortgage and homebuying process together. It can also be the case if they have newly built homes that have sat vacant for a while. If a builder is offering closing cost discounts, ask if that incentive can come in the form of a rate buydown.

Ask the seller. Sometimes, a seller will buy down your rate for you to buy their home. This is a rare case, especially in a seller’s market. However, you can ask for the seller to cover this part of your closing costs when you make an offer on a house or during the negotiation process.

Dig deeper: Seller concessions — An inside look at a powerful real estate negotiating tool

An interest rate buydown on a mortgage is a way to reduce your interest rate — temporarily or permanently — with cash paid up front at closing. Permanent buydowns are done by purchasing discount points, and one point equals a 0.25% reduction in your interest rate. Discount points typically cost 1% of your total mortgage. For instance, one point on a $300,000 mortgage would cost $3,000 for a 0.25% reduction in your interest rate. Temporary buydowns work a little differently, and you’ll need to go through a mortgage lender with an official buydown loan program.

The maximum number of points a lender will generally allow you to purchase is four, equaling a 1% reduction in your interest rate. However, it could be worth exploring temporary buydown programs that could result in more significant rate reductions for the first few years of your mortgage.

Buying points on a mortgage could be worth it if you plan on staying in your home long enough to recoup what you’ve spent on mortgage points. It could also be worth it to buy points if you have the extra cash, and using it to buy down your rate wouldn’t keep you from achieving other financial goals.

This article was edited by Laura Grace Tarpley.

As you go through the home-buying process for the first time, you're bound to encounter different interest rates when looking for loans online or working with mortgage lenders. However, there is a difference between the interest rate and the APR when shopping for a mortgage — and understanding the difference is crucial.

APR is an acronym for "annual percentage rate," which reflects the total borrowing costs of your mortgage. Essentially, it’s what you pay on top of the principal balance you borrow.

Your mortgage interest rate is one component that gets factored into your mortgage APR, but since your APR is the full borrowing cost of your home loan on an annualized basis, it includes other expenses. Therefore, your APR will likely be higher than your interest rate.

Learn more: What is mortgage interest, and how does it work?

The other expenses that could get factored into your mortgage APR, besides your interest rate, include mortgage points, underwriting or origination fees, or select closing costs.

The mortgage points (if applicable), fees, and closing cost elements of your APR impact the amount of money you’ll need when closing on a house. You’ll pay for those expenses in cash to finalize your home loan.

The interest rate aspect of your mortgage APR influences your ongoing monthly payment amount. The higher your interest rate, the higher your housing bill (and overall home loan cost).

You may choose to pay mortgage points to lower your interest rate.

Yahoo Finance tip: The APR calculation processes can vary from lender to lender, so it’s wise to ask your financial institution what costs are reflected in the figures they provide. If you’re looking to do a little research on your own, a good APR calculator can provide you with some estimates.

"I think mortgage APR is generally the best way to compare rates because APR includes the origination fees and closing costs," said Ted Erhart, certified financial planner and founder of Norris Lake Retirement Planning, via email interview.

"In other words," said Erhart, "it’s an all-in 'price' for the loan. If you shop for mortgages online, you’ll often see advertisements for what appear to be low rates. But if you look closely, the rate being offered comes with two, three, or even more origination points. Hence, the face rate is misleading because it doesn’t include thousands of dollars of origination and closing costs."

You can find the mortgage APR on page three of the lender-provided Loan Estimate form. Your mortgage lender must give you a copy of this document within three days of receiving your mortgage application.

Yahoo Finance tip: Make sure you compare apples to apples when reviewing your mortgage options. Request that lenders provide Loan Estimates with no mortgage points included.

Read more: 6 tips for choosing the right mortgage lender

Since the interest rate is one of the main factors that influences your mortgage APR, here are some strategies that may reduce your cost to borrow:

Improving your credit score and reducing debt.

Always compare mortgage offers from several lenders. You may find a lender that charges fewer (or less expensive) fees than another.

The length and type of your mortgage can impact the APR you pay, too.

Dig deeper: Where and how to find the lowest mortgage rates right now

While it may seem counterintuitive, there are times when a higher mortgage APR may work in your favor.

"For instance, if the borrower plans to stay in the home for a short period, they might opt for a loan with higher fees (and thus a higher APR) in exchange for a lower interest rate. This strategy can be cost-effective if the lower interest payments outweigh the upfront fees over the time the borrower holds the loan," said Bryan Jordan, certified financial planner and managing partner of Censifi, via email.

Erhart said, "A higher APR could make sense for someone who is more concerned about monthly cash flow as opposed to the interest expense. For example, 15-year terms generally have lower rates and APRs than 30-year mortgages. But many home buyers are willing to pay a higher rate for a lower monthly payment."

Learn more: 15-year vs. 30-year mortgages