What is the primary purpose of a rate lock?

The primary purpose of a rate lock is to guarantee an interest rate for a borrower. When a borrower locks in a rate, they are essentially securing that rate against fluctuations in the market until they proceed with the loan closing. This protection is particularly important during periods of rising interest rates, as it avoids the risk of the rate increasing before the loan is finalized.

While rate locks do not directly affect monthly payments, closing costs, or the simplification of the loan application process, they provide borrowers with peace of mind by ensuring they will not face unexpected increases in borrowing costs. This helps borrowers budget accurately and make informed decisions about their financing options.