What does "Rate lock" mean in real estate?

A rate lock (also called a mortgage rate lock or lock‑in) is a lender’s commitment to hold a specific mortgage interest rate — and sometimes the price of discount points or credits — for a fixed period (commonly 15–60 days). It protects a borrower from rising interest rates during loan processing so long as the loan closes before the lock expires and there are no material changes to the application.

How rate locks work

Purpose: Shields borrowers from upward moves in market rates while the loan is being underwritten and closed.
When you can lock: Typically after you apply and have a ratified purchase contract; some lenders offer “lock and shop” programs that let you lock earlier.
Typical duration: 30, 45, or 60 days are common; 90‑day or longer locks are available for complex deals, often for a fee.
Cost: Short locks (e.g., 30 days) are often free; longer locks may cost roughly 0.125%–0.5% of the loan amount.
Points: You can lock the price of discount points when buying down a rate.
Risk: If you miss the lock expiration you may pay to extend it or accept a higher, current market rate.

Why a rate lock matters

Rate locks provide budget certainty and protect loan qualification. If rates rise after you lock, your rate remains the same; if rates fall, most lenders won’t automatically give you the lower rate unless you purchased a float‑down option. Without a lock you’re exposed to market volatility that can increase monthly payments or push your debt‑to‑income ratio above lender limits.

Real‑world examples

Example 1 — Lock vs. float (qualification impact)

Two buyers seek a $400,000 mortgage with 20% down. Buyer A locks at 6.10% on June 1; Buyer B floats. By August 1 rates rose to 6.91%. Buyer A keeps the 6.10% payment and stays within lender DTI thresholds; Buyer B faces a higher payment at 6.91% and is denied — the only change was the interest rate. Takeaway: a lock can preserve approval.

Example 2 — Long‑term savings

Borrow $320,000 for 30 years. Locked rate: 6.75% (45‑day lock). Market later hits 7.00%. Monthly P&I falls from $2,129 (7.00%) to $2,076 (6.75%) — $53/month and about $19,243 saved over the loan life. Even a quarter‑point matters.

Example 3 — Protecting a household budget

Lock 6.5% for 30 days on $300,000. A week later rates rise to 7.0%. Your payment stays at $1,896 instead of $1,996, saving $100/month during ownership and avoiding short‑term budget shock.

When should you lock?

If rates are volatile or showing upward pressure, lock once you have an accepted offer and a realistic closing date within the lock window.
Use “lock and shop” only if you understand the cost and timeline risk in competitive markets.
Rate locks are also used for refinances, especially when avoiding a known higher rate is the goal.

Potential pitfalls

Lock expiration: Delays past the lock date may require paying to extend the lock or accepting whatever the current rate is.
Fees: Longer locks can be costly; always compare the extension or lock fee versus likely market movement.
No automatic reductions: Most locks do not reduce if rates fall unless you paid for a float‑down.
Application changes: Major changes to loan amount, property, or borrower credit can void the lock.

Quick comparison

Scenario	With Rate Lock	Without Rate Lock
Rates rise before closing	Keep original lower rate	Pay the higher current rate
Rates fall before closing	Stuck at locked rate unless a float‑down was bought	Benefit from the lower rate
Loan qualification (DTI)	Payment certainty helps approval	Risk of disqualification if rates rise
Closing delayed beyond lock	May pay extension fee or get new rate	Always gets current market rate

Bottom line

A rate lock is a practical tool to secure mortgage cost certainty during the often‑lengthy homebuying or refinancing process. Locking at the right time can save thousands, protect loan approval, and stabilize monthly payments — but locking too early or for too long can create unnecessary fees. Weigh current market trends, your closing timeline, and lock costs to decide the best strategy for your transaction.