The lock, and the deadline it sets.

The short answer

A rate lock holds the loan's interest rate until a stated expiration date, so the loan has to fund before that date or the borrower pays to extend or reprice. The lock turns a flexible closing calendar into one with a hard outside date.

Plan the calendar backward from the expiration. Put a due date on every item that gates funding, start the items that depend on outside parties first, and set an internal funding target well ahead of the lock so a late document still has room to recover.

What is a rate lock in commercial real estate lending?

A rate lock is the lender's commitment to a specific rate, or to a spread over an index, for a set period before closing. The terms sit in a rate lock agreement or in the commitment. They state the locked rate or spread, the expiration date, any deposit, and the consequences if the loan misses the date.

Lenders that fund loans through the capital markets often hedge a locked rate. When a locked loan falls through, the lender unwinds the hedge, and lock agreements typically pass that cost to the borrower through breakage provisions.

Agency lenders, life companies, banks and CMBS lenders each handle locks their own way. Timing, deposits and extension terms vary by program, so read the lock agreement before building the calendar.

What should you read in a rate lock agreement?

Read these terms before the lock is signed, since each one shapes the closing calendar.

• Locked rate or spread

  Whether the lock fixes an all-in rate or a spread over an index that still moves until closing.
• Expiration and extensions

  The expiration date, whether extensions are available, how many, and how each one is priced.
• Deposit terms

  The deposit amount, what it secures, and when it is refunded, applied at closing or kept.
• Breakage

  How the lender calculates hedge costs if the loan fails to close, and which events trigger them.
• Loan amount tolerance

  How far the loan amount can move before the lock needs repricing.
• Conditions and termination

  Which approvals and third-party items must be satisfied, and which changes to the property or borrower end the lock.

What happens if a rate lock expires before closing?

The lock agreement defines the outcome. The usual paths carry different costs.

How does a rate lock line up with other closing deadlines?

A locked deal often runs on three calendars at once. The lock expiration sets the last date the rate holds. The commitment letter carries its own expiration. An acquisition adds the purchase contract's closing date and any extension deposits the buyer would owe the seller.

Some buyers carry a fourth deadline. Section 1031 of the Internal Revenue Code requires an exchanging buyer to identify replacement property within 45 days of selling the old property and to receive it within 180 days, or by the tax return due date if that comes first.

Put every deadline on the same plan and treat the earliest one as the outside date. Negotiating one extension while another date passes unnoticed turns a scheduling problem into a deal problem.

How do floating-rate loans handle rate risk at closing?

Floating-rate loans, common in bridge and transitional lending, carry no locked rate. Lenders often require the borrower to buy an interest rate cap instead, which pays out if the index rises above a strike rate for a term matching the loan's initial maturity.

The cap becomes a closing item with its own outside party. The borrower selects a cap provider, the lender approves the counterparty and the strike, and the cap confirmation and its assignment to the lender are signed before funding. Cap pricing moves with rates until the trade executes, so the purchase date belongs on the closing plan.

How do you build a closing calendar around a lock?

Build the plan from the expiration date back to today. Each step below gives the calendar a fixed anchor.

• 1
  Anchor on the expiration date

  Write the lock expiration at the top of the closing plan and set an internal funding target ahead of it.
• 2
  List every gating item

  Include lender conditions, third-party reports, title and survey, estoppels, insurance, entity documents, payoffs and consents.
• 3
  Date each item backward

  Give every item a due date that leaves review time before the internal target, and name its owner.
• 4
  Start outside clocks first

  Send estoppel requests, the insurance requirements letter, payoff requests and consent requests in the first week.
• 5
  Set the review cadence

  Review the list weekly through the middle of the closing and daily once the internal target is two weeks away.
• 6
  Agree on escalation triggers

  Decide in advance which slips go to the relationship manager and at what point the team requests an extension.

Which delays put a rate lock at risk?

Items that depend on outside parties carry the most risk, because the lender has no way to speed them up. Tenant estoppels, releases from prior lenders, municipal zoning letters and consents from partners or ground lessors all move on someone else's schedule.

Third-party report revisions come next. An appraisal or property condition assessment that needs changes after underwriter review pushes back the clearing of conditions. Loan committee timing, the borrower's equity and know-your-customer documents for newly formed entities round out the list.

Late discovery costs more than the delay itself. A slow estoppel found in week three is a scheduling issue. The same estoppel found in the final week can cost the lock.

When should you ask for a rate lock extension?

Ask as soon as the calendar shows the internal target slipping past the expiration. Lenders approve and price extensions case by case, and an early request gives the lender time to arrange its hedge and internal approvals.

Bring specifics: the items still open, their owners, the new target date and the evidence that the remaining work will finish. A request built from a current open items list reads as a managed delay. A request built from estimates reads as a deal in trouble.

Confirm the extension in writing, with the new expiration, the fee and any rate change, and update every due date on the closing plan the same day.

Who pays when a delay breaks the lock?

Lock agreements usually put extension fees and breakage on the borrower, whatever caused the delay. That makes ownership of each gating item a commercial question. A borrower who paid for an extension because loan documents came back late will remember it at the next deal.

Record who owns every item and the date each one went late. When an extension request goes to the lender, that record shows which delays sat on the lender's side and supports a conversation about the fee.

What keeps locked deals on schedule?

Visibility keeps locked deals on schedule. When every gating item shows its owner, due date and status in one place, the team sees a slip the day it happens, while escalation still works.

Prodeal gives each deal a checklist with due dates and statuses that the lender, borrower's counsel and the title company share. Prodeal customers close about 50% faster, and that margin matters most when a lock sets the outside date.