What If a Refinance Loan Is Not Closed Before the Lock Expiration Date?

A refinance loan has a lot of moving parts that can often be difficult to coordinate. You have to stay on top of the lenders, lawyers and title companies to keep moving toward settlement, especially if you have paid a rate-lock fee. This guarantees you will get the rate in effect at the time of application. However, if the rate-lock period expires, all bets are off and you will face the possibility that your rate can increase.

Act Immediately

A change in the interest rate can cost you hundreds of dollars per month on your refinance. If you know your lock-in agreement is close to expiring, act immediately to try to work out an extension. Just because your rate lock expires doesn’t mean that the rate will automatically increase. If closing is scheduled and rates are stable, it may be worth the gamble to wait as opposed to paying additional fees to extend the lock-in. If you are not confident that the rate environment will hold, don’t wait until the rate increases weeks after your lock-in has expired. Most lenders will not be receptive to helping you out at that point.

Check the Original Document

The bank will provide you with a copy of your rate-lock agreement. Read it carefully to assess your rights. Some rate locks carry extension clauses. If your agreement allows for an extension there will likely be a fee associated with exercising the clause. Look for exemptions to the rate expiration clause. If the lock-in expired due to the bank’s negligence, you may be entitled to an automatic extension at no cost. Be informed before contacting the bank.

Contact the Bank

With a copy of your rate-lock agreement in-hand, call the bank. If possible, speak to the mortgage representative who originally took your application. Banks are built on relationships and, in many cases, will be willing to accommodate both long-time loyal customers and potentially strong new clients. Explain to the bank rep that you want to extend the rate-lock period on your refinance. If the bank insists on a fee, attempt to negotiate. The bank may be willing to waive or reduce fees based on deposit relationships, future lending opportunities or even the prospect of losing your business to a competitor. Whatever approach you take, be cordial and professional in your interactions.

Look Elsewhere

If the bank is adamant on not continuing the rate lock or charging a fee to do so, consider refinancing elsewhere. Even if the rates have increased at the original bank, you may find a lower rate at another financial institution. If the new bank is eager for new business, it may offer attractive rates and reduced fees. If you find a better deal and it makes sense financially, don’t hesitate to explore that option. In some cases, the original bank may become more receptive once it realizes the threat of your losing your business is becoming a reality.

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