Getting It in Writing Is the Key to an Agreement That Locks In an Interest Rate
QWhile refinancing our home, I saw that mortgage interest rates were declining. I called my potential lender and we agreed that I would let the interest rate float rather than lock it in. My loan officer advised me that rates were not down at his company. When I told him that I was offered a lower rate when I called the financial institution's toll-free number, the loan officer just shrugged this off, saying, "That was probably just to draw new business." I was told that I could not get a lower rate because I was already "in the system." Is this usual or ethical?</br></br>AWe either have the classic situation of "bait and switch," or your loan officer was just trying to make you keep a higher mortgage rate.</br></br>However, your question has confused me. If your loan was not locked in, that is, you were to obtain a floating rate, then why did the loan officer indicate that you were already "in the system," supposedly at a certain rate? Let's look at the basic difference between a floating rate and a locked-in rate.</br></br>Take your chances that when you actually go to closing, the then- current mortgage interest rate will be equal to or less than the rate at the time you made the loan application.</br></br>Lock in the rate so that whether rates go up or down, you are guaranteed to get the rate you have agreed upon. The first choice is often referred to as a "floating rate"; the second is a "lock-in" rate.