What is the term used when a borrower secures a guarantee from the lender that the interest rate quoted will not change before closing?

The term used when a borrower secures a guarantee from the lender that the interest rate quoted will not change before closing is referred to as a "lock-in clause." This clause provides assurance to the borrower that the specified interest rate will remain valid and unchanged for a designated period, usually until the loan closes.

This mechanism is crucial in today's fluctuating interest rate environment because it protects the borrower from potential increases in rates during the period leading up to closing, which can significantly impact their financial planning and loan affordability. By locking in the rate, borrowers can avoid the uncertainty of market variations and confidently move forward in the home buying or refinancing process.

Other options might refer to related concepts but serve different purposes. For instance, a rate cap typically refers to a limit placed on how much an interest rate can increase over time, while an interest lock more generally refers to the process of securing a rate without the specific legal reassurance given by a lock-in clause. A pre-approval notice, on the other hand, indicates that a borrower has been pre-approved for a loan based on their financial information but does not pertain to securing a specific interest rate before closing.