Locking in an adjustable-rate mortgage (ARM) before interest rates climb can save you a significant amount of money over the life of your loan. If you're considering purchasing a home or refinancing, it's crucial to understand how to effectively lock in your rate. Here’s how to secure your adjustable-rate mortgage at a favorable rate.
1. Understand Adjustable Rate Mortgages
An adjustable-rate mortgage typically features a lower initial interest rate compared to fixed-rate loans. However, this rate can change based on market conditions after the initial fixed period expires. To guard yourself against rising rates, locking in your rate before the adjustment occurs is a strategic move.
2. Monitor Market Trends
3. Consult with Lenders
Approach multiple lenders to discuss your ARM options and ask about their current rates. Inquire about their process for locking in an interest rate. Some lenders offer a rate lock that guarantees your interest rate for a set period, often ranging from 30 to 90 days. Know the specifics of their locking process to make informed decisions.
4. Request a Rate Lock
5. Assess Locking Terms
6. Stay in Communication
7. Be Ready to Move Fast
8. Prepare for Future Adjustments
Conclusion
