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Lock-In Period

Definition - What does Lock-In Period mean?

The lock-in period, as it pertains to real estate, is the specific amount of time, designated by a lender, in which the mortgage interest rate for a loan will be held steady, allowing time for the loan to be processed.

Justipedia explains Lock-In Period

Home buyers may choose to lock in an interest rate if they believe that interest rates are likely to rise in the near term. Common terms for lock-in periods can include 20, 30, 45, 60, 90, or 120 days. It is not unusual, however, for lenders to charge a fee for locking in a rate—a fee that is generally non-refundable if the home buyer decides not to purchase the home or if they are denied credit to purchase the home. The fee generally costs more the longer the lock-in period.

Lock-in period rates should be long enough to allow the home buyer to complete the home loan application process and allow for any unexpected delays. If the lock-in period expires and the home loan has not been approved, home buyers may lose not only their interest rate and any purchased points, but if interest rates have increased, they may also have to pay substantially more interest over the life of the loan.

Home buyers should consider several factors prior to locking in a loan. For example, some home buyers may decide to wait until they have found a home to purchase before locking in a rate. If the rate has to be extended, however, the home buyer will have to pay additional fees.

A lock-in period, as it relates to initial public stock offerings, can also refer to a designated time period in which company executives and large shareholders are barred from selling shares of a particular company. The lock-in or lock-up period for stock restrictions varies, but can last anywhere from 90 to 180 days.

The goal of the lock-up period, as described for public stock offerings, is to limit the supply of stock and stop employees from cashing out their shares, thus flooding the market and driving the price of the company’s stock down.

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