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:
A. Lockout provision
B. Rate lock agreement
C. Floating rate agreement
D. Yield maintenance provision

Answer 1

Answer: Option (B)

Explanation:

Here, in this case, the situation that arises is referred to as the rate lock agreement. Rate lock is referred to as the concurrence in between the individuals i.e. borrower and lender. The agreement further allows borrower to lock in interest rate on the mortgage for particular time period at current interest rate that persists in the marketplace.