Example: Susan opts for a rate lock
Susan has been looking for her dream house for quite some time and finally has found one that suits her and her young family. She takes out a $450,000 loan over 30 years.
She has applied for a fixed home loan with a rate of 2.50% for three years. This means Susan can budget for her repayments accurately for 3 whole years. Settlement is 60 days, and Susan is worried that interest rates will rise soon. So she opts for a rate lock, with a $100 fee.
Some time after submitting the application, the rate for her loan rises to 2.75%. Because of her rate lock she has avoided a rate hike of 0.25%. In dollar terms this is a big saving. Susan's monthly repayments at 2.50% are $1,778. At 2.75% she would be stuck paying $1,837 a month. Over 3 years, that $400 rate lock fee has saved her $2,124 in interest charges.
Do I need to pay rate lock if it goes over 90 days and I am unable to settle the property?
Hi Peter,
Thanks for your question.
Locking your home loan interest rate usually comes with a fee. So if you’ve applied for it, yes, you still have to pay the fee even when you’re unable to settle your loan/it goes over 90 days. Contacting your lender directly is also best so they may be able to advise as to how much and when would the fee be charged.
Cheers,
May