Protect against rate fluctuations

Interest rates are constantly in flux and currently hover around six percent for someone with good credit and no origination fees looking at a 30-year fixed rate mortgage. Rates may rise and fall while potential home buyers are pounding the pavement. Fortunately, there are solutions to the uncertainty.

Rate protection plans cap a mortgage rate at a pre-determined level and provide assurance that monthly payments won't surpass a certain point, regardless of the market's activity.

"When factoring the rate into a long-term budget, a protection plan makes sound financial sense," said Jim McEneaney, senior regional vice president of Coldwell Banker Residential Brokerage. "Even a slight increase of half a percentage point adds up to thousands of dollars over the life of the loan."

To protect yourself against rate fluctuations, take these ideas into consideration:

Protection plans. Buyers often purchase protection plans before closing, though current homeowners can also take advantage of this safety-net. The cost is usually around $250 and is repaid as a credit if it's purchased before closing.

Making a lock. Only serious buyers should buy a protection plan and lock in their rate. If rates are locked but then allowed to expire, which typically takes about 30 to 90 days, fees may be levied or buyers could be forced to take the current market rate. Rate protection for homeowners begins immediately so there is no expiration date on the terms.

Benefit to sellers. Sellers stand to benefit from rate protection plans too, if only indirectly. Buyers that have locked in their rate aren't casually shopping around, which is important for sellers to consider before taking an offer or when juggling multiple bids.