What is the purpose of a rate lock in mortgage financing?

The purpose of a rate lock in mortgage financing is to secure an interest rate for a specified period. When a borrower locks in their rate, they are ensuring that the interest rate on their mortgage will remain the same during the agreed-upon timeframe, regardless of fluctuations in the market. This is particularly important in volatile interest rate environments where rates may rise, potentially increasing the overall cost of borrowing. By locking in a rate, borrowers can have peace of mind knowing exactly what their monthly payments will be, enabling better financial planning and budgeting.