RateCity
Rate Lock Fee
If you're applying for a fixed-rate home loan then the advertised rate offered is current for that day. So by the time your home purchase settles in, say six weeks, that rate may no longer be on offer unless you pay a rate lock fee.
The exact fee charged to lock in a fixed rate will be at your lender's discretion, with some charging a fixed rate lock fee while others calculate it based on a percentage of the amount being borrowed. For instance, one institution may charge a $700 rate lock fee, while some offer the service free of charge.
Why pay the fee?
One of the main reasons to opt for a rate lock fee is when you're concerned rates will rise in the time after you apply for a mortgage and before you are approved. It's usually offered to new loan customers exclusively - so if you're thinking of switching to a fixed rate after holding a loan for period, you'll not likely be able to pay a rate lock fee for this service.
It can be a great option, because it gives the borrower peace of mind and can save you a lot of money in the long run.
For example, if you want to borrow $300,000 to purchase a property and the best three-year fixed rate is 7.14 percent, the rate lock fee may be $500. If during that period the bank increases rates by 0.25 percent you may save around $600 per year or $1,800 over three years. That's an overall saving of $1,300 after deducting the rate lock fee, so clearly it can be worth your while.
On the other hand if the bank drops its rates then you'll still be offered the lower rate on your home loan, but the rate lock fee will not be refunded.
Rate-locking can be a good idea, particularly during times of market volatility as it typically puts a rate on hold for you for about 90 days - although this may vary so check with your provider.
But it does come at a price, so you'll need to weigh up the costs and keep an eye on the market and compare mortgages so you're confident that you're getting the best home loan available.
The table below displays today's best three year fixed rate home loans available from banks on RateCity.
The exact fee charged to lock in a fixed rate will be at your lender's discretion, with some charging a fixed rate lock fee while others calculate it based on a percentage of the amount being borrowed. For instance, one institution may charge a $700 rate lock fee, while some offer the service free of charge.
Why pay the fee?
One of the main reasons to opt for a rate lock fee is when you're concerned rates will rise in the time after you apply for a mortgage and before you are approved. It's usually offered to new loan customers exclusively - so if you're thinking of switching to a fixed rate after holding a loan for period, you'll not likely be able to pay a rate lock fee for this service.
It can be a great option, because it gives the borrower peace of mind and can save you a lot of money in the long run.
For example, if you want to borrow $300,000 to purchase a property and the best three-year fixed rate is 7.14 percent, the rate lock fee may be $500. If during that period the bank increases rates by 0.25 percent you may save around $600 per year or $1,800 over three years. That's an overall saving of $1,300 after deducting the rate lock fee, so clearly it can be worth your while.
On the other hand if the bank drops its rates then you'll still be offered the lower rate on your home loan, but the rate lock fee will not be refunded.
Rate-locking can be a good idea, particularly during times of market volatility as it typically puts a rate on hold for you for about 90 days - although this may vary so check with your provider.
But it does come at a price, so you'll need to weigh up the costs and keep an eye on the market and compare mortgages so you're confident that you're getting the best home loan available.
The table below displays today's best three year fixed rate home loans available from banks on RateCity.
