Finance

In New York, a 'forward rate lock' on a mortgage allows the borrower to:

ALock in today's rate for a future closing date, protecting against interest rate increases during the application and approval process✓ Correct

BPay the rate that will be in effect on the day of closing regardless of current rates

CAdjust the rate downward if rates fall before closing

DTransfer the locked rate to a different property

Explanation

A rate lock (or forward rate lock) allows a New York mortgage borrower to lock in the current interest rate for a specified period (typically 30–90 days) during the mortgage application process. If market rates rise before closing, the borrower is protected.

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Key Terms to Know

Adjustable-Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.

Discount Points

Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.

Private Mortgage Insurance (PMI)

Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.

Deed of Trust

A security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.