Rate Protection
Definition of "Rate Protection"
Protection for a borrower against the danger that rates will rise between the time the borrower applies for a loan and the time the loan closes. Rate protection can take the form of a lock, where the rate and points are frozen at their initial levels until the loan closes, or a float-down, where the rates and points cannot rise from their initial levels but they can decline if market rates decline. In either case, the protection only runs for a specified period. If the loan is not closed within that period, the protection expires and the borrower will have to either accept the terms quoted by the lender on new loans at that time or start the shopping process anew.
Popular Mortgage Terms
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision. In a narrower sense, ...
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A rate lock, plus an option to reduce the rate if market interest rates decline during the lock period. ...
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The maximum allowable increase in the interest rate on an ARM each time the rate is adjusted. It is usually one or two percentage points. ...
The interest rate that is fixed for some specified number of months or years at the beginning of the life of an ARM. ...
On an ARM, the assumption that the interest rate rises to the maximum extent permitted by the loan contract. ...
The most recently published value of the index used to adjust the interest rate on an indexed ARM. ...
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