Second Mortgage

An Ohio second mortgage rate lock is a lender’s promise to hold a certain interest rate.

And a certain number of points on this rate commitment for a specified period of time while the loan application is being processed.

When a consumer applies for an Ohio mortgage loan, he or she has the choice to lock in a rate at application, to let the rate float between application and closing, or to choose a float-down program.

A rate float is a delay of the decision to fix the interest rate. Keep in mind that if the interest rate changes 1/8 to 1/4%, for most people this is a difference of $10 or $20 per month in interest— a difference, but not a great difference.

It is the borrower who is applying for a larger loan who would significantly benefit from floating the interest rate. A float-down option is the ability to lock in a rate today and take advantage of any drop before the closing.

The cost for this feature and all rate lock policies varies greatly by lender. So it is important for the Ohio home loan originator to be knowledgeable about the rate lock policies of the lenders he or she will be working with.

Remember that the longer you want to lock in a rate, the more risk the lender takes, and, therefore, the more expensive the rate is. Although rates are often stable, in an active market the rates can literally change by the hour.

Interest rates tend to move down slowly but increase quickly. The cost for a rate lock is relatively small when compared to the cost of an interest rate increase. Most lenders charge an additional 1/4% on a 90-day rate lock.

So how do you choose, that is, to float or loct in a rate? For instance:

On a $100,000 Ohio home loan amount 30-year term 1/4% additional fee for a 90-day lock If interest rate increases by 1/4 of 1% Interest rate increase over the life of a 30-year loan $250 $16 per month $4,000 in a higher payment.