What does it mean to "lock in" an interest rate?

To "lock in" an interest rate means to secure a specific interest rate for a set period. This process allows homebuyers or borrowers to commit to a particular interest rate while they are in the process of securing a mortgage or home loan, protecting them from potential increases in interest rates during that period. By locking in the rate, the borrower ensures that even if market rates rise before they finalize the mortgage, they will still receive the originally agreed-upon interest rate, which can lead to significant savings over the life of the loan. This is particularly important in fluctuating economic conditions where interest rates can change frequently.

The other options do not accurately describe what it means to "lock in" an interest rate. Negotiating lower closing costs refers to discussions about the upfront fees involved in finalizing a mortgage. Adjusting the principal amount borrowed involves changing the loan amount itself, which is unrelated to the interest rate. Ensuring variable payment options pertains to different types of loan agreements rather than securing a specific interest rate. Therefore, locking in primarily relates to interest rates, making the second option the correct choice.