What happens to my rate lock if my new build is delayed by several months?
Answered by Allen Markel, REALTOR®, Texas Premier Realty ·
Short answer
Your rate lock is between you and your lender, not the builder. A delay does not automatically extend it. Contact your lender immediately to understand your lock terms, expiration date, and options if the home closes after the lock expires. You may be able to extend the lock, float down, or renegotiate, depending on the lender and market conditions. Negotiate completion deadlines and remedies in your contract with the builder.
Rate locks are separate from the construction timeline
Your mortgage rate lock is a contract between you and your lender. The builder's construction schedule and your rate lock operate independently. If the builder delays completion, your lock does not automatically extend. The lender sets the lock period, typically 30 to 60 days, and that clock starts when you apply or when the lender issues the lock.
When you sign the new home contract, the builder gives you an estimated completion date. Your lender uses that date to time the lock so it covers the expected closing. If the builder misses that date by weeks or months, your lock may expire before closing.
What to do if a delay is coming
As soon as you know the builder will miss the original completion date, contact your lender. Do not wait until the lock is about to expire. Tell the lender the new expected closing date.
Your lender may offer to extend the lock, often for a fee. Some lenders allow one free extension; others charge a percentage of the loan amount. Some lenders let you float down if rates drop during the extension. The terms depend entirely on your lender's policy and the loan type.
If the lock expires before closing, you may be able to renegotiate a new rate with the lender, but that rate will be whatever the market offers on the day you lock again, not your original rate. There is no guarantee the new rate will be better or worse.
Protect yourself in the contract
When you make an offer on a new home, the contract should address what happens if the builder delays. Some buyers negotiate a builder credit or price reduction if closing is pushed beyond a certain date. Others negotiate the right to walk away without penalty if the delay exceeds a set number of months.
These terms are negotiable between you and the builder at the time you sign. Once the contract is signed, the builder's obligation to complete by a specific date is in writing. If the builder breaches that deadline, you have remedies, but they depend on what the contract says and whether the delay is the builder's fault or caused by events beyond the builder's control.
Talk to us to find the right option for your circumstances. We help you understand the builder's timeline, coordinate with your lender on the rate lock, and negotiate contract terms that protect you if delays happen.
Common follow-up questions
Can the builder extend my rate lock?
No. The builder has no control over your rate lock. Only your lender can extend it, and extension terms and fees are set by the lender, not the builder.
What if my lock expires and the home is not ready?
You will need to lock a new rate with your lender at the current market rate. That rate may be higher or lower than your original lock. Some lenders allow you to float down during an extension period if rates drop.
Should I ask the builder to commit to a completion date in writing?
Yes. The contract should state a completion date and what happens if the builder misses it. Negotiate whether you get a credit, price reduction, or the right to terminate if the delay exceeds a certain number of days or months.
Can I hold the builder responsible for a higher interest rate caused by delay?
That depends on the contract and whether the delay is the builder's fault. Consult a Texas attorney about your specific situation and what the contract says about delays and remedies.
Sources
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