Locked Your Mortgage Rate? Here Is What a Float-Down Option Does

A question I hear from buyers once they are under contract: if I lock my rate today and rates come down next week, am I stuck? The honest answer is that it depends on what your lender offers and what you agreed to when you locked.

Start with the lock itself. When you lock, the lender commits to a specific rate for a fixed period, long enough to get the loan through processing and to the closing table. The lock protects you if rates climb during that period. It also means that if rates ease, a plain lock generally leaves you where you were.

That is the gap a float-down is meant to fill. A float-down is a feature some lenders attach to a rate lock. If their rates improve while your loan is in process, it gives you a way to step down to the better rate before closing.

Before you count on it, understand how it tends to be structured.

Availability. Some lenders offer it, some do not, and some limit it to particular loan programs.

Cost. You may pay a fee for the option, or the lender may price it into the lock. Either way, it has a cost, and you should see that cost stated plainly.

Trigger. Lenders commonly require the improvement in rates to reach a minimum amount before the option applies. A small move may not qualify.

One use. In many cases you can exercise it a single time.

Deadline. There is usually a cutoff ahead of closing. After that date the option is gone.

The thing most people get wrong is treating a float-down as something that happens for them. It is usually something you have to request, on the lender's terms, inside the lender's deadline.

So the practical step is simple. Before you lock, ask your loan officer whether a float-down is available on your loan, what it costs, what has to happen for you to use it, and the last day you can use it. Ask for the answer in writing and keep it with your loan paperwork.

I am a REALTOR, not a lender, and I do not call rates. The decision on when to lock and whether to pay for a float-down belongs with you and a licensed lender who can see your full file and your timeline.

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This is general information, not legal or tax advice.

Jon Hegreness, REALTOR / Associate Broker, Howe Realty
(623) 826-0888 / JonHegreness@gmail.com / License BR540940000
9059 W Lake Pleasant Pkwy, B-200, Peoria, AZ 85382
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