A lender's commitment to hold a quoted interest rate for a set number of days before closing, often backed by a deposit the borrower can lose if the loan does not close.
Between a quote and a closing, rates move. A rate lock fixes the rate for a period so the borrower can finish due diligence without that risk. The lender in turn commits to deliver the loan to its funding source, which is why a lock usually takes a deposit and why a loan that does not close can cost money.
Fannie Mae’s guide for its multifamily lenders shows a formal version. The lock period may be up to 180 days for a fixed rate loan and 45 days for an adjustable rate loan. Before locking, the lender collects a good faith deposit from the borrower: at least 1 percent of the lock amount for loans of $9 million or less locked for up to 90 days, 2 percent above $9 million, and 3 percent for locks of more than 90 and up to 180 days. On a $5,000,000 loan locked for 60 days that is at least $50,000. If the loan is not delivered, breakage fees can come out of it.
A bank or credit union that keeps its loans sets its own practice. Ask whether the rate is set at commitment or at closing.
How it shows up in the data here
Not shown on this site. No public file records when or whether a rate was locked. HMDA rows carry the final interest rate, and loan comps prints the median reported rate by lender for multifamily loans made. Whether a lender locks at commitment, at closing or not at all is its own practice, so ask each lender on your list when the rate is set and what a lock costs.
Go further
- Multifamily loan comps: Multifamily loans made, with median reported rate and term by lender.
- Multifamily lenders: Lenders by multifamily loans held and made, by state.
- Multifamily loan checklist for 5+ unit properties: A larger apartment loan can go to five kinds of lender. They want much the same package. They differ on recourse, term, prepayment, speed and what they ask of the sponsor.
- What a lender-ready loan package looks like: A lender decides in minutes whether to keep reading. A package that answers the first five questions on one page, and backs each answer with a document, gets read.
Related terms
- Fixed rate loan: A loan whose interest rate is set at closing and does not change for a stated period, often the whole term, so the principal and interest payment stays the same.
- Commitment letter: A commitment letter is the lender's written, binding promise to make a loan on stated terms, if the conditions listed in the letter are met by a set date.
- Term sheet: A term sheet is a short written outline of the loan a lender is prepared to consider: amount, rate, term, fees and main conditions. It is usually not binding.
- Spread (margin over an index): The fixed number of percentage points a lender adds to an index, such as prime or SOFR, to set a loan's interest rate.
- Agency lender: A lender authorized to make apartment loans that Fannie Mae or Freddie Mac then buys or backs, under those companies' rules instead of the lender's own.
- Prepayment penalty: A charge a loan agreement sets for paying off some or all of the principal before a stated date. Common forms are a step-down schedule, yield maintenance and defeasance.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.