Which term refers to an agreement that secures a specified interest rate upon receiving a loan?

A rate lock is a commitment from a lender to secure a specified interest rate for a borrower over a set period while the loan is processed. This essentially protects the borrower from potential fluctuations in interest rates, ensuring that they can close the loan at the agreed-upon rate, regardless of market changes during the lock period. A rate lock is particularly important in a fluctuating market, as it can help borrowers save money over the duration of their loan by locking in lower rates.

In real estate transactions, where timing can greatly affect the final cost of the mortgage, securing a rate lock can provide peace of mind to both the borrower and the lender. This is a standard practice in the mortgage industry, and understanding its significance can help agents better guide their clients through the home financing process.

The other terms mentioned may not accurately define this concept within the context of loan agreements, which is why they are less suitable. For example, "interest lock" and "interest hold" are not commonly recognized terms in this context, and "fixed rate guarantee" does not specify the aspect of securing a specific interest rate for a temporary period during loan processing, which is central to the definition of a rate lock.