What does it mean to "lock-in" a mortgage interest rate?

Locking in a mortgage interest rate refers to the process of securing a specific interest rate for a loan, typically during the time between the loan application and final closing. When a borrower "locks in" an interest rate, they protect themselves from potential increases in rates before their loan is finalized. This is particularly important in a fluctuating interest rate environment, as rising rates could lead to significantly higher monthly payments if not locked in.

Locking in a rate gives borrowers peace of mind and helps them plan their finances more accurately since they will know exactly what their interest payments will be based on the locked-in rate. The duration of the lock can vary, with options ranging from a few weeks to several months, depending on the lender and market conditions. Thus, choosing to lock in a specific interest rate is a key strategy for borrowers in managing risk during the mortgage process.