diff --git a/cmd/lncli/walletrpc_active.go b/cmd/lncli/walletrpc_active.go
index f09560169..3e01ecf14 100644
--- a/cmd/lncli/walletrpc_active.go
+++ b/cmd/lncli/walletrpc_active.go
@@ -22,6 +22,7 @@ import (
 	"github.com/btcsuite/btcd/wire"
 	"github.com/lightningnetwork/lnd/lnrpc"
 	"github.com/lightningnetwork/lnd/lnrpc/walletrpc"
+	"github.com/lightningnetwork/lnd/lnwallet/chanfunding"
 	"github.com/urfave/cli"
 )
 
@@ -1537,7 +1538,7 @@ func releaseOutput(ctx *cli.Context) error {
 		return fmt.Errorf("error parsing outpoint: %w", err)
 	}
 
-	lockID := walletrpc.LndInternalLockID[:]
+	lockID := chanfunding.LndInternalLockID[:]
 	lockIDStr := ctx.String("lockid")
 	if lockIDStr != "" {
 		var err error
diff --git a/docs/release-notes/release-notes-0.18.0.md b/docs/release-notes/release-notes-0.18.0.md
index 8ec828cc8..d7a472813 100644
--- a/docs/release-notes/release-notes-0.18.0.md
+++ b/docs/release-notes/release-notes-0.18.0.md
@@ -90,6 +90,11 @@
   precision issue when querying payments and invoices using the start and end
   date filters.
 
+* [Fixed](https://github.com/lightningnetwork/lnd/pull/8496) an issue where
+  `locked_balance` is not updated in `WalletBalanceResponse` when outputs are
+  reserved for `OpenChannel` by using non-volatile leases instead of volatile
+  locks.
+
 # New Features
 ## Functional Enhancements
 
@@ -364,6 +369,7 @@
 
 # Contributors (Alphabetical Order)
 
+* Alex Akselrod
 * Amin Bashiri
 * Andras Banki-Horvath
 * BitcoinerCoderBob
diff --git a/itest/list_on_test.go b/itest/list_on_test.go
index 69fdf6787..1de36b962 100644
--- a/itest/list_on_test.go
+++ b/itest/list_on_test.go
@@ -574,4 +574,8 @@ var allTestCases = []*lntest.TestCase{
 		Name:     "coop close with htlcs",
 		TestFunc: testCoopCloseWithHtlcs,
 	},
+	{
+		Name:     "open channel locked balance",
+		TestFunc: testOpenChannelLockedBalance,
+	},
 }
diff --git a/itest/lnd_open_channel_test.go b/itest/lnd_open_channel_test.go
index d8cf66485..919e6ae97 100644
--- a/itest/lnd_open_channel_test.go
+++ b/itest/lnd_open_channel_test.go
@@ -14,6 +14,7 @@ import (
 	"github.com/lightningnetwork/lnd/lntest"
 	"github.com/lightningnetwork/lnd/lntest/node"
 	"github.com/lightningnetwork/lnd/lntest/rpc"
+	"github.com/lightningnetwork/lnd/lntest/wait"
 	"github.com/stretchr/testify/require"
 )
 
@@ -822,3 +823,59 @@ func testSimpleTaprootChannelActivation(ht *lntest.HarnessTest) {
 	// Our test is done and Alice closes her channel to Bob.
 	ht.CloseChannel(alice, chanPoint)
 }
+
+// testOpenChannelLockedBalance tests that when a funding reservation is
+// made for opening a channel, the balance of the required outputs shows
+// up as locked balance in the WalletBalance response.
+func testOpenChannelLockedBalance(ht *lntest.HarnessTest) {
+	var (
+		alice = ht.Alice
+		bob   = ht.Bob
+		req   *lnrpc.ChannelAcceptRequest
+		err   error
+	)
+
+	// We first make sure Alice has no locked wallet balance.
+	balance := alice.RPC.WalletBalance()
+	require.EqualValues(ht, 0, balance.LockedBalance)
+
+	// Next, we register a ChannelAcceptor on Bob. This way, we can get
+	// Alice's wallet balance after coin selection is done and outpoints
+	// are locked.
+	stream, cancel := bob.RPC.ChannelAcceptor()
+	defer cancel()
+
+	// Then, we request creation of a channel from Alice to Bob. We don't
+	// use OpenChannelSync since we want to receive Bob's message in the
+	// same goroutine.
+	openChannelReq := &lnrpc.OpenChannelRequest{
+		NodePubkey:         bob.PubKey[:],
+		LocalFundingAmount: int64(funding.MaxBtcFundingAmount),
+	}
+	_ = alice.RPC.OpenChannel(openChannelReq)
+
+	// After that, we receive the request on Bob's side, get the wallet
+	// balance from Alice, and ensure the locked balance is non-zero.
+	err = wait.NoError(func() error {
+		req, err = stream.Recv()
+		return err
+	}, defaultTimeout)
+	require.NoError(ht, err)
+
+	balance = alice.RPC.WalletBalance()
+	require.NotEqualValues(ht, 0, balance.LockedBalance)
+
+	// Next, we let Bob deny the request.
+	resp := &lnrpc.ChannelAcceptResponse{
+		Accept:        false,
+		PendingChanId: req.PendingChanId,
+	}
+	err = wait.NoError(func() error {
+		return stream.Send(resp)
+	}, defaultTimeout)
+	require.NoError(ht, err)
+
+	// Finally, we check to make sure the balance is unlocked again.
+	balance = alice.RPC.WalletBalance()
+	require.EqualValues(ht, 0, balance.LockedBalance)
+}
diff --git a/lncfg/config.go b/lncfg/config.go
index 07c37875d..889b327f6 100644
--- a/lncfg/config.go
+++ b/lncfg/config.go
@@ -69,10 +69,6 @@ const (
 	// closure.
 	DefaultOutgoingCltvRejectDelta = DefaultOutgoingBroadcastDelta + 3
 
-	// DefaultReservationTimeout is the default time we wait until we remove
-	// an unfinished (zombiestate) open channel flow from memory.
-	DefaultReservationTimeout = 10 * time.Minute
-
 	// DefaultZombieSweeperInterval is the default time interval at which
 	// unfinished (zombiestate) open channel flows are purged from memory.
 	DefaultZombieSweeperInterval = 1 * time.Minute
diff --git a/lncfg/dev.go b/lncfg/dev.go
index 7eb295824..0c887457f 100644
--- a/lncfg/dev.go
+++ b/lncfg/dev.go
@@ -4,6 +4,8 @@ package lncfg
 
 import (
 	"time"
+
+	"github.com/lightningnetwork/lnd/lnwallet/chanfunding"
 )
 
 // IsDevBuild returns a bool to indicate whether we are in a development
@@ -37,7 +39,7 @@ func (d *DevConfig) GetUnsafeDisconnect() bool {
 
 // GetReservationTimeout returns the config value for `ReservationTimeout`.
 func (d *DevConfig) GetReservationTimeout() time.Duration {
-	return DefaultReservationTimeout
+	return chanfunding.DefaultReservationTimeout
 }
 
 // GetZombieSweeperInterval returns the config value for`ZombieSweeperInterval`.
diff --git a/lncfg/dev_integration.go b/lncfg/dev_integration.go
index 86a4af275..0f0227e01 100644
--- a/lncfg/dev_integration.go
+++ b/lncfg/dev_integration.go
@@ -4,6 +4,8 @@ package lncfg
 
 import (
 	"time"
+
+	"github.com/lightningnetwork/lnd/lnwallet/chanfunding"
 )
 
 // IsDevBuild returns a bool to indicate whether we are in a development
@@ -33,7 +35,7 @@ func (d *DevConfig) ChannelReadyWait() time.Duration {
 // GetReservationTimeout returns the config value for `ReservationTimeout`.
 func (d *DevConfig) GetReservationTimeout() time.Duration {
 	if d.ReservationTimeout == 0 {
-		return DefaultReservationTimeout
+		return chanfunding.DefaultReservationTimeout
 	}
 
 	return d.ReservationTimeout
diff --git a/lnrpc/walletrpc/psbt.go b/lnrpc/walletrpc/psbt.go
index b05d75054..19b102473 100644
--- a/lnrpc/walletrpc/psbt.go
+++ b/lnrpc/walletrpc/psbt.go
@@ -6,23 +6,18 @@ package walletrpc
 import (
 	"fmt"
 	"math"
-	"time"
 
 	"github.com/btcsuite/btcd/wire"
 	base "github.com/btcsuite/btcwallet/wallet"
 	"github.com/btcsuite/btcwallet/wtxmgr"
 	"github.com/lightningnetwork/lnd/lnwallet"
+	"github.com/lightningnetwork/lnd/lnwallet/chanfunding"
 )
 
 const (
 	defaultMaxConf = math.MaxInt32
 )
 
-var (
-	// DefaultLockDuration is the default duration used to lock outputs.
-	DefaultLockDuration = 10 * time.Minute
-)
-
 // verifyInputsUnspent checks that all inputs are contained in the list of
 // known, non-locked UTXOs given.
 func verifyInputsUnspent(inputs []*wire.TxIn, utxos []*lnwallet.Utxo) error {
@@ -56,13 +51,14 @@ func lockInputs(w lnwallet.WalletController,
 	for idx := range outpoints {
 		lock := &base.ListLeasedOutputResult{
 			LockedOutput: &wtxmgr.LockedOutput{
-				LockID:   LndInternalLockID,
+				LockID:   chanfunding.LndInternalLockID,
 				Outpoint: outpoints[idx],
 			},
 		}
 
 		expiration, pkScript, value, err := w.LeaseOutput(
-			lock.LockID, lock.Outpoint, DefaultLockDuration,
+			lock.LockID, lock.Outpoint,
+			chanfunding.DefaultLockDuration,
 		)
 		if err != nil {
 			// If we run into a problem with locking one output, we
@@ -72,7 +68,7 @@ func lockInputs(w lnwallet.WalletController,
 			for i := 0; i < idx; i++ {
 				op := locks[i].Outpoint
 				if err := w.ReleaseOutput(
-					LndInternalLockID, op,
+					chanfunding.LndInternalLockID, op,
 				); err != nil {
 					log.Errorf("could not release the "+
 						"lock on %v: %v", op, err)
diff --git a/lnrpc/walletrpc/walletkit_server.go b/lnrpc/walletrpc/walletkit_server.go
index 3e71070aa..79cc3e78e 100644
--- a/lnrpc/walletrpc/walletkit_server.go
+++ b/lnrpc/walletrpc/walletkit_server.go
@@ -184,18 +184,6 @@ var (
 	// configuration file in this package.
 	DefaultWalletKitMacFilename = "walletkit.macaroon"
 
-	// LndInternalLockID is the binary representation of the SHA256 hash of
-	// the string "lnd-internal-lock-id" and is used for UTXO lock leases to
-	// identify that we ourselves are locking an UTXO, for example when
-	// giving out a funded PSBT. The ID corresponds to the hex value of
-	// ede19a92ed321a4705f8a1cccc1d4f6182545d4bb4fae08bd5937831b7e38f98.
-	LndInternalLockID = wtxmgr.LockID{
-		0xed, 0xe1, 0x9a, 0x92, 0xed, 0x32, 0x1a, 0x47,
-		0x05, 0xf8, 0xa1, 0xcc, 0xcc, 0x1d, 0x4f, 0x61,
-		0x82, 0x54, 0x5d, 0x4b, 0xb4, 0xfa, 0xe0, 0x8b,
-		0xd5, 0x93, 0x78, 0x31, 0xb7, 0xe3, 0x8f, 0x98,
-	}
-
 	// allWitnessTypes is a mapping between the witness types defined in the
 	// `input` package, and the witness types in the protobuf definition.
 	// This map is necessary because the native enum and the protobuf enum
@@ -482,7 +470,7 @@ func (w *WalletKit) LeaseOutput(ctx context.Context,
 
 	// Don't allow our internal ID to be used externally for locking. Only
 	// unlocking is allowed.
-	if lockID == LndInternalLockID {
+	if lockID == chanfunding.LndInternalLockID {
 		return nil, errors.New("reserved id cannot be used")
 	}
 
@@ -492,7 +480,7 @@ func (w *WalletKit) LeaseOutput(ctx context.Context,
 	}
 
 	// Use the specified lock duration or fall back to the default.
-	duration := DefaultLockDuration
+	duration := chanfunding.DefaultLockDuration
 	if req.ExpirationSeconds != 0 {
 		duration = time.Duration(req.ExpirationSeconds) * time.Second
 	}
diff --git a/lntest/mock/walletcontroller.go b/lntest/mock/walletcontroller.go
index 6c0f3e6a9..6381b4bb3 100644
--- a/lntest/mock/walletcontroller.go
+++ b/lntest/mock/walletcontroller.go
@@ -186,12 +186,6 @@ func (w *WalletController) ListTransactionDetails(int32, int32,
 	return nil, nil
 }
 
-// LockOutpoint currently does nothing.
-func (w *WalletController) LockOutpoint(o wire.OutPoint) {}
-
-// UnlockOutpoint currently does nothing.
-func (w *WalletController) UnlockOutpoint(o wire.OutPoint) {}
-
 // LeaseOutput returns the current time and a nil error.
 func (w *WalletController) LeaseOutput(wtxmgr.LockID, wire.OutPoint,
 	time.Duration) (time.Time, []byte, btcutil.Amount, error) {
diff --git a/lntest/wait/timeouts_remote_db.go b/lntest/wait/timeouts_remote_db.go
index 902508136..bc6784ff0 100644
--- a/lntest/wait/timeouts_remote_db.go
+++ b/lntest/wait/timeouts_remote_db.go
@@ -20,7 +20,7 @@ const (
 
 	// DefaultTimeout is a timeout that will be used for various wait
 	// scenarios where no custom timeout value is defined.
-	DefaultTimeout = time.Second * 30
+	DefaultTimeout = time.Second * 45
 
 	// AsyncBenchmarkTimeout is the timeout used when running the async
 	// payments benchmark.
diff --git a/lnwallet/btcwallet/btcwallet.go b/lnwallet/btcwallet/btcwallet.go
index fd4683509..3790af507 100644
--- a/lnwallet/btcwallet/btcwallet.go
+++ b/lnwallet/btcwallet/btcwallet.go
@@ -1053,28 +1053,6 @@ func (b *BtcWallet) CreateSimpleTx(outputs []*wire.TxOut,
 	)
 }
 
-// LockOutpoint marks an outpoint as locked meaning it will no longer be deemed
-// as eligible for coin selection. Locking outputs are utilized in order to
-// avoid race conditions when selecting inputs for usage when funding a
-// channel.
-//
-// NOTE: This method requires the global coin selection lock to be held.
-//
-// This is a part of the WalletController interface.
-func (b *BtcWallet) LockOutpoint(o wire.OutPoint) {
-	b.wallet.LockOutpoint(o)
-}
-
-// UnlockOutpoint unlocks a previously locked output, marking it eligible for
-// coin selection.
-//
-// NOTE: This method requires the global coin selection lock to be held.
-//
-// This is a part of the WalletController interface.
-func (b *BtcWallet) UnlockOutpoint(o wire.OutPoint) {
-	b.wallet.UnlockOutpoint(o)
-}
-
 // LeaseOutput locks an output to the given ID, preventing it from being
 // available for any future coin selection attempts. The absolute time of the
 // lock's expiration is returned. The expiration of the lock can be extended by
diff --git a/lnwallet/chanfunding/assembler.go b/lnwallet/chanfunding/assembler.go
index 08fe31e43..a694d2a2c 100644
--- a/lnwallet/chanfunding/assembler.go
+++ b/lnwallet/chanfunding/assembler.go
@@ -1,9 +1,12 @@
 package chanfunding
 
 import (
+	"time"
+
 	"github.com/btcsuite/btcd/btcutil"
 	"github.com/btcsuite/btcd/wire"
 	"github.com/btcsuite/btcwallet/wallet"
+	"github.com/btcsuite/btcwallet/wtxmgr"
 	"github.com/lightningnetwork/lnd/lnwallet/chainfee"
 )
 
@@ -34,18 +37,18 @@ type CoinSelectionLocker interface {
 	WithCoinSelectLock(func() error) error
 }
 
-// OutpointLocker allows a caller to lock/unlock an outpoint. When locked, the
-// outpoints shouldn't be used for any sort of channel funding of coin
-// selection. Locked outpoints are not expected to be persisted between
-// restarts.
-type OutpointLocker interface {
-	// LockOutpoint locks a target outpoint, rendering it unusable for coin
+// OutputLeaser allows a caller to lease/release an output. When leased, the
+// outputs shouldn't be used for any sort of channel funding or coin selection.
+// Leased outputs are expected to be persisted between restarts.
+type OutputLeaser interface {
+	// LeaseOutput leases a target output, rendering it unusable for coin
 	// selection.
-	LockOutpoint(o wire.OutPoint)
+	LeaseOutput(i wtxmgr.LockID, o wire.OutPoint, d time.Duration) (
+		time.Time, []byte, btcutil.Amount, error)
 
-	// UnlockOutpoint unlocks a target outpoint, allowing it to be used for
+	// ReleaseOutput releases a target output, allowing it to be used for
 	// coin selection once again.
-	UnlockOutpoint(o wire.OutPoint)
+	ReleaseOutput(i wtxmgr.LockID, o wire.OutPoint) error
 }
 
 // Request is a new request for funding a channel. The items in the struct
diff --git a/lnwallet/chanfunding/wallet_assembler.go b/lnwallet/chanfunding/wallet_assembler.go
index 651bc5558..d4ee080bc 100644
--- a/lnwallet/chanfunding/wallet_assembler.go
+++ b/lnwallet/chanfunding/wallet_assembler.go
@@ -3,6 +3,7 @@ package chanfunding
 import (
 	"fmt"
 	"math"
+	"time"
 
 	"github.com/btcsuite/btcd/btcec/v2"
 	"github.com/btcsuite/btcd/btcutil"
@@ -10,10 +11,34 @@ import (
 	"github.com/btcsuite/btcd/txscript"
 	"github.com/btcsuite/btcd/wire"
 	"github.com/btcsuite/btcwallet/wallet"
+	"github.com/btcsuite/btcwallet/wtxmgr"
 	"github.com/lightningnetwork/lnd/input"
 	"github.com/lightningnetwork/lnd/keychain"
 )
 
+const (
+	// DefaultReservationTimeout is the default time we wait until we remove
+	// an unfinished (zombiestate) open channel flow from memory.
+	DefaultReservationTimeout = 10 * time.Minute
+
+	// DefaultLockDuration is the default duration used to lock outputs.
+	DefaultLockDuration = 10 * time.Minute
+)
+
+var (
+	// LndInternalLockID is the binary representation of the SHA256 hash of
+	// the string "lnd-internal-lock-id" and is used for UTXO lock leases to
+	// identify that we ourselves are locking an UTXO, for example when
+	// giving out a funded PSBT. The ID corresponds to the hex value of
+	// ede19a92ed321a4705f8a1cccc1d4f6182545d4bb4fae08bd5937831b7e38f98.
+	LndInternalLockID = wtxmgr.LockID{
+		0xed, 0xe1, 0x9a, 0x92, 0xed, 0x32, 0x1a, 0x47,
+		0x05, 0xf8, 0xa1, 0xcc, 0xcc, 0x1d, 0x4f, 0x61,
+		0x82, 0x54, 0x5d, 0x4b, 0xb4, 0xfa, 0xe0, 0x8b,
+		0xd5, 0x93, 0x78, 0x31, 0xb7, 0xe3, 0x8f, 0x98,
+	}
+)
+
 // FullIntent is an intent that is fully backed by the internal wallet. This
 // intent differs from the ShimIntent, in that the funding transaction will be
 // constructed internally, and will consist of only inputs we wholly control.
@@ -37,9 +62,9 @@ type FullIntent struct {
 	// change from the main funding transaction.
 	ChangeOutputs []*wire.TxOut
 
-	// coinLocker is the Assembler's instance of the OutpointLocker
+	// coinLeaser is the Assembler's instance of the OutputLeaser
 	// interface.
-	coinLocker OutpointLocker
+	coinLeaser OutputLeaser
 
 	// coinSource is the Assembler's instance of the CoinSource interface.
 	coinSource CoinSource
@@ -194,7 +219,13 @@ func (f *FullIntent) Outputs() []*wire.TxOut {
 // NOTE: Part of the chanfunding.Intent interface.
 func (f *FullIntent) Cancel() {
 	for _, coin := range f.InputCoins {
-		f.coinLocker.UnlockOutpoint(coin.OutPoint)
+		err := f.coinLeaser.ReleaseOutput(
+			LndInternalLockID, coin.OutPoint,
+		)
+		if err != nil {
+			log.Warnf("Failed to release UTXO %s (%v))",
+				coin.OutPoint, err)
+		}
 	}
 
 	f.ShimIntent.Cancel()
@@ -216,9 +247,9 @@ type WalletConfig struct {
 	// access to the current set of coins returned by the CoinSource.
 	CoinSelectLocker CoinSelectionLocker
 
-	// CoinLocker is what the WalletAssembler uses to lock coins that may
+	// CoinLeaser is what the WalletAssembler uses to lease coins that may
 	// be used as inputs for a new funding transaction.
-	CoinLocker OutpointLocker
+	CoinLeaser OutputLeaser
 
 	// Signer allows the WalletAssembler to sign inputs on any potential
 	// funding transactions.
@@ -493,7 +524,13 @@ func (w *WalletAssembler) ProvisionChannel(r *Request) (Intent, error) {
 		for _, coin := range selectedCoins {
 			outpoint := coin.OutPoint
 
-			w.cfg.CoinLocker.LockOutpoint(outpoint)
+			_, _, _, err = w.cfg.CoinLeaser.LeaseOutput(
+				LndInternalLockID, outpoint,
+				DefaultReservationTimeout,
+			)
+			if err != nil {
+				return err
+			}
 		}
 
 		newIntent := &FullIntent{
@@ -503,7 +540,7 @@ func (w *WalletAssembler) ProvisionChannel(r *Request) (Intent, error) {
 				musig2:           r.Musig2,
 			},
 			InputCoins: selectedCoins,
-			coinLocker: w.cfg.CoinLocker,
+			coinLeaser: w.cfg.CoinLeaser,
 			coinSource: w.cfg.CoinSource,
 			signer:     w.cfg.Signer,
 		}
diff --git a/lnwallet/interface.go b/lnwallet/interface.go
index 3df0a7328..c3944d812 100644
--- a/lnwallet/interface.go
+++ b/lnwallet/interface.go
@@ -393,20 +393,6 @@ type WalletController interface {
 	ListTransactionDetails(startHeight, endHeight int32,
 		accountFilter string) ([]*TransactionDetail, error)
 
-	// LockOutpoint marks an outpoint as locked meaning it will no longer
-	// be deemed as eligible for coin selection. Locking outputs are
-	// utilized in order to avoid race conditions when selecting inputs for
-	// usage when funding a channel.
-	//
-	// NOTE: This method requires the global coin selection lock to be held.
-	LockOutpoint(o wire.OutPoint)
-
-	// UnlockOutpoint unlocks a previously locked output, marking it
-	// eligible for coin selection.
-	//
-	// NOTE: This method requires the global coin selection lock to be held.
-	UnlockOutpoint(o wire.OutPoint)
-
 	// LeaseOutput locks an output to the given ID, preventing it from being
 	// available for any future coin selection attempts. The absolute time
 	// of the lock's expiration is returned. The expiration of the lock can
diff --git a/lnwallet/mock.go b/lnwallet/mock.go
index dc59c63ac..1c1fb61a5 100644
--- a/lnwallet/mock.go
+++ b/lnwallet/mock.go
@@ -192,12 +192,6 @@ func (w *mockWalletController) ListTransactionDetails(int32, int32,
 	return nil, nil
 }
 
-// LockOutpoint currently does nothing.
-func (w *mockWalletController) LockOutpoint(o wire.OutPoint) {}
-
-// UnlockOutpoint currently does nothing.
-func (w *mockWalletController) UnlockOutpoint(o wire.OutPoint) {}
-
 // LeaseOutput returns the current time and a nil error.
 func (w *mockWalletController) LeaseOutput(wtxmgr.LockID, wire.OutPoint,
 	time.Duration) (time.Time, []byte, btcutil.Amount, error) {
diff --git a/lnwallet/test/test_interface.go b/lnwallet/test/test_interface.go
index f97b6500c..caa222cf4 100644
--- a/lnwallet/test/test_interface.go
+++ b/lnwallet/test/test_interface.go
@@ -2990,7 +2990,7 @@ func testSingleFunderExternalFundingTx(miner *rpctest.Harness,
 		chanfunding.WalletConfig{
 			CoinSource:            lnwallet.NewCoinSource(alice),
 			CoinSelectLocker:      alice,
-			CoinLocker:            alice,
+			CoinLeaser:            alice,
 			Signer:                alice.Cfg.Signer,
 			DustLimit:             600,
 			CoinSelectionStrategy: wallet.CoinSelectionLargest,
diff --git a/lnwallet/wallet.go b/lnwallet/wallet.go
index 6a8ced33b..7786791f9 100644
--- a/lnwallet/wallet.go
+++ b/lnwallet/wallet.go
@@ -588,7 +588,7 @@ func (l *LightningWallet) ResetReservations() {
 	l.reservationIDs = make(map[[32]byte]uint64)
 
 	for outpoint := range l.lockedOutPoints {
-		l.UnlockOutpoint(outpoint)
+		_ = l.ReleaseOutput(chanfunding.LndInternalLockID, outpoint)
 	}
 	l.lockedOutPoints = make(map[wire.OutPoint]struct{})
 }
@@ -851,7 +851,7 @@ func (l *LightningWallet) handleFundingReserveRequest(req *InitFundingReserveMsg
 		cfg := chanfunding.WalletConfig{
 			CoinSource:       &CoinSource{l},
 			CoinSelectLocker: l,
-			CoinLocker:       l,
+			CoinLeaser:       l,
 			Signer:           l.Cfg.Signer,
 			DustLimit: DustLimitForSize(
 				input.P2WSHSize,
@@ -1425,7 +1425,10 @@ func (l *LightningWallet) handleFundingCancelRequest(req *fundingReserveCancelMs
 	// requests.
 	for _, unusedInput := range pendingReservation.ourContribution.Inputs {
 		delete(l.lockedOutPoints, unusedInput.PreviousOutPoint)
-		l.UnlockOutpoint(unusedInput.PreviousOutPoint)
+		_ = l.ReleaseOutput(
+			chanfunding.LndInternalLockID,
+			unusedInput.PreviousOutPoint,
+		)
 	}
 
 	// TODO(roasbeef): is it even worth it to keep track of unused keys?
diff --git a/server.go b/server.go
index a089a2238..ea51242e4 100644
--- a/server.go
+++ b/server.go
@@ -53,6 +53,7 @@ import (
 	"github.com/lightningnetwork/lnd/lnrpc/routerrpc"
 	"github.com/lightningnetwork/lnd/lnwallet"
 	"github.com/lightningnetwork/lnd/lnwallet/chainfee"
+	"github.com/lightningnetwork/lnd/lnwallet/chanfunding"
 	"github.com/lightningnetwork/lnd/lnwallet/rpcwallet"
 	"github.com/lightningnetwork/lnd/lnwire"
 	"github.com/lightningnetwork/lnd/nat"
@@ -1279,7 +1280,7 @@ func newServer(cfg *Config, listenAddrs []net.Addr,
 	// For the reservationTimeout and the zombieSweeperInterval different
 	// values are set in case we are in a dev environment so enhance test
 	// capacilities.
-	reservationTimeout := lncfg.DefaultReservationTimeout
+	reservationTimeout := chanfunding.DefaultReservationTimeout
 	zombieSweeperInterval := lncfg.DefaultZombieSweeperInterval
 
 	// Get the development config for funding manager. If we are not in
diff --git a/sweep/walletsweep.go b/sweep/walletsweep.go
index 831b0151e..bcfd90315 100644
--- a/sweep/walletsweep.go
+++ b/sweep/walletsweep.go
@@ -3,13 +3,16 @@ package sweep
 import (
 	"fmt"
 	"math"
+	"time"
 
 	"github.com/btcsuite/btcd/btcutil"
 	"github.com/btcsuite/btcd/txscript"
 	"github.com/btcsuite/btcd/wire"
+	"github.com/btcsuite/btcwallet/wtxmgr"
 	"github.com/lightningnetwork/lnd/input"
 	"github.com/lightningnetwork/lnd/lnwallet"
 	"github.com/lightningnetwork/lnd/lnwallet/chainfee"
+	"github.com/lightningnetwork/lnd/lnwallet/chanfunding"
 )
 
 const (
@@ -134,17 +137,18 @@ type CoinSelectionLocker interface {
 	WithCoinSelectLock(func() error) error
 }
 
-// OutpointLocker allows a caller to lock/unlock an outpoint. When locked, the
-// outpoints shouldn't be used for any sort of channel funding of coin
-// selection. Locked outpoints are not expected to be persisted between restarts.
-type OutpointLocker interface {
-	// LockOutpoint locks a target outpoint, rendering it unusable for coin
+// OutputLeaser allows a caller to lease/release an output. When leased, the
+// outputs shouldn't be used for any sort of channel funding or coin selection.
+// Leased outputs are expected to be persisted between restarts.
+type OutputLeaser interface {
+	// LeaseOutput leases a target output, rendering it unusable for coin
 	// selection.
-	LockOutpoint(o wire.OutPoint)
+	LeaseOutput(i wtxmgr.LockID, o wire.OutPoint, d time.Duration) (
+		time.Time, []byte, btcutil.Amount, error)
 
-	// UnlockOutpoint unlocks a target outpoint, allowing it to be used for
+	// ReleaseOutput releases a target output, allowing it to be used for
 	// coin selection once again.
-	UnlockOutpoint(o wire.OutPoint)
+	ReleaseOutput(i wtxmgr.LockID, o wire.OutPoint) error
 }
 
 // WalletSweepPackage is a package that gives the caller the ability to sweep
@@ -179,11 +183,11 @@ type DeliveryAddr struct {
 // leftover amount after these outputs and transaction fee, is sent to a single
 // output, as specified by the change address. The sweep transaction will be
 // crafted with the target fee rate, and will use the utxoSource and
-// outpointLocker as sources for wallet funds.
+// outputLeaser as sources for wallet funds.
 func CraftSweepAllTx(feeRate, maxFeeRate chainfee.SatPerKWeight,
 	blockHeight uint32, deliveryAddrs []DeliveryAddr,
 	changeAddr btcutil.Address, coinSelectLocker CoinSelectionLocker,
-	utxoSource UtxoSource, outpointLocker OutpointLocker,
+	utxoSource UtxoSource, outputLeaser OutputLeaser,
 	signer input.Signer, minConfs int32) (*WalletSweepPackage, error) {
 
 	// TODO(roasbeef): turn off ATPL as well when available?
@@ -196,7 +200,15 @@ func CraftSweepAllTx(feeRate, maxFeeRate chainfee.SatPerKWeight,
 	// can actually craft a sweeping transaction.
 	unlockOutputs := func() {
 		for _, utxo := range allOutputs {
-			outpointLocker.UnlockOutpoint(utxo.OutPoint)
+			// Log the error but continue since we're already
+			// handling an error.
+			err := outputLeaser.ReleaseOutput(
+				chanfunding.LndInternalLockID, utxo.OutPoint,
+			)
+			if err != nil {
+				log.Warnf("Failed to release UTXO %s (%v))",
+					utxo.OutPoint, err)
+			}
 		}
 	}
 
@@ -219,7 +231,13 @@ func CraftSweepAllTx(feeRate, maxFeeRate chainfee.SatPerKWeight,
 		// attempt to use these UTXOs in transactions while we're
 		// crafting out sweep all transaction.
 		for _, utxo := range utxos {
-			outpointLocker.LockOutpoint(utxo.OutPoint)
+			_, _, _, err = outputLeaser.LeaseOutput(
+				chanfunding.LndInternalLockID, utxo.OutPoint,
+				chanfunding.DefaultLockDuration,
+			)
+			if err != nil {
+				return err
+			}
 		}
 
 		allOutputs = append(allOutputs, utxos...)
diff --git a/sweep/walletsweep_test.go b/sweep/walletsweep_test.go
index 4a7ceec7a..f36e472fa 100644
--- a/sweep/walletsweep_test.go
+++ b/sweep/walletsweep_test.go
@@ -4,11 +4,13 @@ import (
 	"bytes"
 	"fmt"
 	"testing"
+	"time"
 
 	"github.com/btcsuite/btcd/btcutil"
 	"github.com/btcsuite/btcd/chaincfg"
 	"github.com/btcsuite/btcd/txscript"
 	"github.com/btcsuite/btcd/wire"
+	"github.com/btcsuite/btcwallet/wtxmgr"
 	"github.com/lightningnetwork/lnd/lntest/mock"
 	"github.com/lightningnetwork/lnd/lnwallet"
 	"github.com/lightningnetwork/lnd/lnwallet/chainfee"
@@ -151,25 +153,34 @@ func (m *mockCoinSelectionLocker) WithCoinSelectLock(f func() error) error {
 
 }
 
-type mockOutpointLocker struct {
-	lockedOutpoints map[wire.OutPoint]struct{}
+type mockOutputLeaser struct {
+	leasedOutputs map[wire.OutPoint]struct{}
 
-	unlockedOutpoints map[wire.OutPoint]struct{}
+	releasedOutputs map[wire.OutPoint]struct{}
 }
 
-func newMockOutpointLocker() *mockOutpointLocker {
-	return &mockOutpointLocker{
-		lockedOutpoints: make(map[wire.OutPoint]struct{}),
+func newMockOutputLeaser() *mockOutputLeaser {
+	return &mockOutputLeaser{
+		leasedOutputs: make(map[wire.OutPoint]struct{}),
 
-		unlockedOutpoints: make(map[wire.OutPoint]struct{}),
+		releasedOutputs: make(map[wire.OutPoint]struct{}),
 	}
 }
 
-func (m *mockOutpointLocker) LockOutpoint(o wire.OutPoint) {
-	m.lockedOutpoints[o] = struct{}{}
+func (m *mockOutputLeaser) LeaseOutput(_ wtxmgr.LockID, o wire.OutPoint,
+	t time.Duration) (time.Time, []byte, btcutil.Amount, error) {
+
+	m.leasedOutputs[o] = struct{}{}
+
+	return time.Now().Add(t), nil, 0, nil
 }
-func (m *mockOutpointLocker) UnlockOutpoint(o wire.OutPoint) {
-	m.unlockedOutpoints[o] = struct{}{}
+
+func (m *mockOutputLeaser) ReleaseOutput(_ wtxmgr.LockID,
+	o wire.OutPoint) error {
+
+	m.releasedOutputs[o] = struct{}{}
+
+	return nil
 }
 
 var sweepScript = []byte{
@@ -234,53 +245,53 @@ var testUtxos = []*lnwallet.Utxo{
 	},
 }
 
-func assertUtxosLocked(t *testing.T, utxoLocker *mockOutpointLocker,
+func assertUtxosLeased(t *testing.T, utxoLeaser *mockOutputLeaser,
 	utxos []*lnwallet.Utxo) {
 
 	t.Helper()
 
 	for _, utxo := range utxos {
-		if _, ok := utxoLocker.lockedOutpoints[utxo.OutPoint]; !ok {
-			t.Fatalf("utxo %v was never locked", utxo.OutPoint)
+		if _, ok := utxoLeaser.leasedOutputs[utxo.OutPoint]; !ok {
+			t.Fatalf("utxo %v was never leased", utxo.OutPoint)
 		}
 	}
 
 }
 
-func assertNoUtxosUnlocked(t *testing.T, utxoLocker *mockOutpointLocker,
+func assertNoUtxosReleased(t *testing.T, utxoLeaser *mockOutputLeaser,
 	utxos []*lnwallet.Utxo) {
 
 	t.Helper()
 
-	if len(utxoLocker.unlockedOutpoints) != 0 {
-		t.Fatalf("outputs have been locked, but shouldn't have been")
+	if len(utxoLeaser.releasedOutputs) != 0 {
+		t.Fatalf("outputs have been released, but shouldn't have been")
 	}
 }
 
-func assertUtxosUnlocked(t *testing.T, utxoLocker *mockOutpointLocker,
+func assertUtxosReleased(t *testing.T, utxoLeaser *mockOutputLeaser,
 	utxos []*lnwallet.Utxo) {
 
 	t.Helper()
 
 	for _, utxo := range utxos {
-		if _, ok := utxoLocker.unlockedOutpoints[utxo.OutPoint]; !ok {
-			t.Fatalf("utxo %v was never unlocked", utxo.OutPoint)
+		if _, ok := utxoLeaser.releasedOutputs[utxo.OutPoint]; !ok {
+			t.Fatalf("utxo %v was never released", utxo.OutPoint)
 		}
 	}
 }
 
-func assertUtxosLockedAndUnlocked(t *testing.T, utxoLocker *mockOutpointLocker,
+func assertUtxosLeasedAndReleased(t *testing.T, utxoLeaser *mockOutputLeaser,
 	utxos []*lnwallet.Utxo) {
 
 	t.Helper()
 
 	for _, utxo := range utxos {
-		if _, ok := utxoLocker.lockedOutpoints[utxo.OutPoint]; !ok {
-			t.Fatalf("utxo %v was never locked", utxo.OutPoint)
+		if _, ok := utxoLeaser.leasedOutputs[utxo.OutPoint]; !ok {
+			t.Fatalf("utxo %v was never leased", utxo.OutPoint)
 		}
 
-		if _, ok := utxoLocker.unlockedOutpoints[utxo.OutPoint]; !ok {
-			t.Fatalf("utxo %v was never unlocked", utxo.OutPoint)
+		if _, ok := utxoLeaser.releasedOutputs[utxo.OutPoint]; !ok {
+			t.Fatalf("utxo %v was never released", utxo.OutPoint)
 		}
 	}
 }
@@ -294,10 +305,10 @@ func TestCraftSweepAllTxCoinSelectFail(t *testing.T) {
 	coinSelectLocker := &mockCoinSelectionLocker{
 		fail: true,
 	}
-	utxoLocker := newMockOutpointLocker()
+	utxoLeaser := newMockOutputLeaser()
 
 	_, err := CraftSweepAllTx(
-		0, 0, 10, nil, nil, coinSelectLocker, utxoSource, utxoLocker,
+		0, 0, 10, nil, nil, coinSelectLocker, utxoSource, utxoLeaser,
 		nil, 0,
 	)
 
@@ -309,7 +320,7 @@ func TestCraftSweepAllTxCoinSelectFail(t *testing.T) {
 
 	// At this point, we'll now verify that all outputs were initially
 	// locked, and then also unlocked due to the failure.
-	assertUtxosLockedAndUnlocked(t, utxoLocker, testUtxos)
+	assertUtxosLeasedAndReleased(t, utxoLeaser, testUtxos)
 }
 
 // TestCraftSweepAllTxUnknownWitnessType tests that if one of the inputs we
@@ -320,10 +331,10 @@ func TestCraftSweepAllTxUnknownWitnessType(t *testing.T) {
 
 	utxoSource := newMockUtxoSource(testUtxos)
 	coinSelectLocker := &mockCoinSelectionLocker{}
-	utxoLocker := newMockOutpointLocker()
+	utxoLeaser := newMockOutputLeaser()
 
 	_, err := CraftSweepAllTx(
-		0, 0, 10, nil, nil, coinSelectLocker, utxoSource, utxoLocker,
+		0, 0, 10, nil, nil, coinSelectLocker, utxoSource, utxoLeaser,
 		nil, 0,
 	)
 
@@ -336,7 +347,7 @@ func TestCraftSweepAllTxUnknownWitnessType(t *testing.T) {
 	// At this point, we'll now verify that all outputs were initially
 	// locked, and then also unlocked since we weren't able to find a
 	// witness type for the last output.
-	assertUtxosLockedAndUnlocked(t, utxoLocker, testUtxos)
+	assertUtxosLeasedAndReleased(t, utxoLeaser, testUtxos)
 }
 
 // TestCraftSweepAllTx tests that we'll properly lock all available outputs
@@ -354,18 +365,18 @@ func TestCraftSweepAllTx(t *testing.T) {
 	targetUTXOs := testUtxos[:2]
 	utxoSource := newMockUtxoSource(targetUTXOs)
 	coinSelectLocker := &mockCoinSelectionLocker{}
-	utxoLocker := newMockOutpointLocker()
+	utxoLeaser := newMockOutputLeaser()
 
 	sweepPkg, err := CraftSweepAllTx(
 		0, 0, 10, nil, deliveryAddr, coinSelectLocker, utxoSource,
-		utxoLocker, signer, 0,
+		utxoLeaser, signer, 0,
 	)
 	require.NoError(t, err, "unable to make sweep tx")
 
 	// At this point, all of the UTXOs that we made above should be locked
 	// and none of them unlocked.
-	assertUtxosLocked(t, utxoLocker, testUtxos[:2])
-	assertNoUtxosUnlocked(t, utxoLocker, testUtxos[:2])
+	assertUtxosLeased(t, utxoLeaser, testUtxos[:2])
+	assertNoUtxosReleased(t, utxoLeaser, testUtxos[:2])
 
 	// Now that we have our sweep transaction, we should find that we have
 	// a UTXO for each input, and also that our final output value is the
@@ -397,5 +408,5 @@ func TestCraftSweepAllTx(t *testing.T) {
 	// If we cancel the sweep attempt, then we should find that all the
 	// UTXOs within the sweep transaction are now unlocked.
 	sweepPkg.CancelSweepAttempt()
-	assertUtxosUnlocked(t, utxoLocker, testUtxos[:2])
+	assertUtxosReleased(t, utxoLeaser, testUtxos[:2])
 }