You lock in a mortgage loan rate with a specific closing date in mind. If your closing is delayed and your rate lock looks as if it will expire, you may have the option to extend the lock beforehand, depending on the lender. But if your lock expires before your mortgage closes, you may end up paying more for the rate you initially wanted.
When Rates Go Up
You'll find yourself in one of three situations when your rate lock expires: rates will have risen, rates will have fallen, or rates remained unchanged. Should your lock expire while rates are on the rise, you can expect to pay more for the rate you initially locked in -- through points -- or you can simply accept the higher rate. A point is equal to one percent of your loan amount. Lenders may charge "discount" points for a below-market interest rate. Discount points increase your closing costs.
If your rate-lock expires when rates have fallen or rates haven't moved, you may be able to pick up where you left off. You may end up with the same interest rate at no additional cost; however, it's unlikely your lender will allow you to take advantage of falling rates and lock in a lower rate at no cost. You can then lock the rate again for a specified amount of time, either 10, 15, 30, 45 or 60 more days. Technically, you can also "float," or let your interest rate fluctuate with the market until closing; loan officers may advise against this if they deem it too risky.
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.