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(The
formal acceptance of a rate for the
permanent mortgage. In addition to the
outstanding mortgage balance, the rate
lock dictates what the payments will
be over the life of the loan)
-
Floating Rate - An interest rate
that is not locked in and is moving
with the current interest rate market.
It is common for construction loans
to have a floating rate since the
structure will be completed at a later,
undetermined date.
-
Construction Rate - The interest
rate used to determine the interest
only payments during construction.
This rate locks in 5 business days
before initial closing. It is a fixed
rate during the construction term.
-
Locked Rate - both the borrower(s)
and lender have formally accepted
the initial interest rate for the
permanent loan.
-
Rate Lock Fee - 1% of the mortgage
amount is collected to lock in an
interest rate prior to settlement.
-
Construction Loan Deposit - 1%
of the mortgage amount is collected
at initial settlement. In the case
of construction loans, the 1% construction
loan deposit is used to offset the
modification fees incurred when the
loan converts from the construction
loan into the permanent mortgage.
It cannot be used towards a rate lock.
-
Expired Rate - A rate is locked
with a lender for a predetermined
amount of time. For example, 30 days,
60 days, 180 days, etc. If the borrower(s)
do not settle or modify their loan
within the rate lock period, their
rate lock expires. When a rate lock
expires, the rate automatically relocks
at the current market rate or the
original lock rate; whichever is the
higher of the two.
- Automatic Rate Lock - if
the borrower(s) fail to lock in the
permanent interest rate 5 business
days prior to modification, the lender
automatically locks in the interest
rate.
-
Float Down Option - Borrower(s)
with a locked interest rate have the
option of lowering or "floating
down" their permanent interest
rate one time before settlement in
the event of a drop in interest rates.
In the case of construction loans,
the float down can occur before modification.
There is a fee associated with the
float down option.
***
Please Note: Borrower(s) want to be
very aware of how rates are moving.
To track interest rates, simply call
your loan officer or 877-226-5242
and ask for the secondary marketing
department. ***
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