Rate lock and loan amount

[Jennifer Knestrick]

I realize this will simply come down to bank policies, but I’m curious what’s typical.

In the the midst of a 1031 exchange, we qualified for a mortgage on the replacement property at $2.9M, and rate locked in mid July. I made the banker aware early and often that we wanted to apply up to the max amount, but would possibly borrow much less (like $1.3M) if we decided to exchange into one property, not two.

OK, so the rate lock occurred. I didn’t sign it, the majority partner did, and when I talked to the banker yesterday, she was going back to underwriting to check if we can reduce from the offered $2.9M without penalty. She’s thinking there would be a penalty. The prepayment terms on the loan are 5% in year one. Again, I haven’t seen this rate lock doc yet (ask for it of course) but am surprised that the rate lock was the loan balance milestone and am curious if this is standard. 

Can mortgage experts comment?