Mortgage rates: What homebuyers can do if they need to break a rate lock

Some Long Islanders in the process of making a purchase may have locked in a mortgage rate at a higher level and may now be regretting their decision.

On Thursday, Freddie Mac announced the average 30-year fixed rate fell to 6.47%, the lowest it has been since May 2023.

Local mortgage professionals told Newsday borrowers have several options before they get to closing.

First, borrowers should talk to their loan officer to find out what can be done.

Brian Levine, a loan officer at Contour Mortgage in Garden City, said it's rare to see mortgage rates drop enough during the 45 to 60 days it takes to complete a purchase but it does happen.

"It has to drop significantly over that short amount of time for this to even be done," Levine said. "But the option is there to do so."

However, many banks and mortgage institutions offer a "lock break fee," Levine said, if you choose to relock at a lower interest rate. There is a minimum amount the rate has to drop to be able to do so — typically, between a quarter and a half of a percentage point, Levine said.

Jeffrey Segal, founder and president of Lighthouse Mortgage Corp. in Hauppauge, said he advises his borrowers that if the rate drop affects a person's loan "significantly enough, move your loan to a different lender."

"I can’t move loans all the time," he added, "but if the rate is a quarter [of a percentage point] of a difference, I’ll go to the borrower and give them the best possible option."

Segal said it can take a lender four or five days to issue a new approval for his borrower, but sometimes a new appraisal might be required by the new lender. This would lead to another out-of-pocket expense, sometimes totaling $600, Segal said.

John Bernardes, vice president of mortgage lending at Rate in Farmingdale, formerly known as Guaranteed Rate, said if the change in rate is significant enough to save borrowers a few hundreds dollars and they have enough time before closing, they have to explore their options.

"We're not talking about $300 at closing. We're talking $300 every month," Bernardes said. "That's a car payment. That's your electric bill or gas bill. If you can save $300, you have to save $300 even if it's stressful and a little work on your end."