Rate Locks on Private Loans: When Your Rate Becomes Final

A rate lock is a lender's promise to hold a specific rate for a set period while your loan is processed. If market rates rise during that window, your rate stays put. Whether you can lock, and when, depends on the lender and the type of loan.

Short-term loans: priced on the deal

Fix and flip, bridge and ground-up construction loans are short term and often close quickly. Their rates are usually driven less by daily market moves and more by the deal itself: your leverage, your experience, your credit and the property.

Because of that, many private lenders don't offer a formal lock on these loans. The rate is set on the term sheet and confirmed at closing, as long as nothing material changes. What can change it: a lower appraisal that raises leverage, a change in the rehab budget, a credit issue, or new information about the property.

Long-term rental loans: closer to the market

DSCR (debt service coverage ratio) loans are long term, and their pricing tracks capital markets more closely. Processing also takes longer. So lenders commonly offer a lock for a set number of days once the application is in and the file clears initial review. Lock terms vary: length, cost, extension fees if you go past the window, and whether a "float down" is available if rates drop.

Construction-to-permanent loans add a wrinkle. Where a lender offers one, the permanent rate is usually set near the end of the build, not at the start, since the project could run months.

Lock now or float?

If a lock is available, the choice comes down to timing and risk tolerance.

Example, round numbers only. You're refinancing into a $300,000 rental loan. Today's quote is 7.5%. Rates rise 0.25% before closing. On a 30-year amortization, that adds roughly $50 a month, about $600 a year. If rates drop 0.25% instead, you'd save about the same. And if rent only barely covers the payment, a rise could push the ratio below the lender's minimum and shrink your loan.

When your coverage is tight or your timeline is long, locking is often the safer call. When you have room and expect rates to ease, floating may make sense.

Questions to ask your lender

• Can I lock, and at what point in the process?
• How long is the lock, and what does it cost?
• What happens if closing slips past the lock date?
• On short-term loans, what could change my rate between term sheet and closing?

What this means for you

Know which kind of loan you have. On short-term loans, protect your rate by keeping the deal consistent with what you submitted. On rental loans, ask about lock terms early and make the decision deliberately.

Want clarity on how your rate is set? Ask RSC Private Lending when you send your scenario. Subject to underwriting.