Question

A commercial real estate loan may take 90 days from the signing of the purchase and sale contract until loan closing. Therefore, there is the possibility for interest rates to fluctuate during this period. In some cases, the lender may offer the borrower the opportunity to "lock in" the interest rate on the loan. To protect against exposure to rate increases during this period, the borrower is often willing to pay a nonrefundable fee as part of what is more commonly known as a

Answer 1

Rate Lock Agreement

Step-by-step explanation:

In this scenario, the term that is being described is known as a Rate Lock Agreement. This agreement is very common in many markets and gives the buyer peace of mind when entering into a payment contract. This agreement helps protect the buyer by preventing the company to increase the interest rate on the contract due to external factors that may occur such as the market interest rates rising or a crash in the market/economy. Otherwise, an increased interest rate may be unpayable by the buyer and they would ultimately lose their entire purchase.

Answer 2

Rate lock agreement

Step-by-step explanation:

A rate lock agreement is that exist between the borrower and lender where the borrower is allowed to lock the interest rate on a loan based on prevailing rate for a certain period of time.

This provision protects the borrower from a future rise in interest rate.

Once interest bid locked it is binding on the lender and borrower despite changes in the market interest rate.

However if interest rate falls the borrower may have the opportunity to withdraw the agreement.