When is the best time to lock an interest rate?

I get asked this question often as everyone wants the lowest rate. Interest rates, like stocks, change daily; it is hard to predict whether the rate will go up or down.

It is best to see what your payment is at the current rate, and take a look at what the payment would be if the rate increases or decreases by ⅛.

Interest rates are quantified by ⅛ s, such as 3 1/8%, 3 1/4%, etc.

You will then be able to calculate the risk.

Example: if a difference in rate by ⅛ results in a $20 difference in monthly payment, then you know that if you don’t lock, you could potentially pay $20 more, or less, per month. If the rate changes by ¼, then the difference would be $40 per month.

Many loan originators watch the 10-year Treasury Bond as a leading indicator as to whether rates will go up or down. If the yield on the 10-year Bond goes up or down, then it is likely the mortgage rates will go up or down.

Ultimately, you have to decide if you are comfortable at the current rate and payment, or whether you want to take the risk of not locking.

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