Float-down deep dive? A float-down provision lets you benefit if mortgage rates drop after you lock. Some lenders include it for free, while others charge a fee. It is one of the most valuable rate lock features you can ask for.
How a Float-Down Works
When you lock a rate, you typically give up the ability to get a lower rate if the market improves. A float-down clause changes that. If rates drop by a certain threshold after you lock, the lender allows you to adjust your rate downward to the current market rate. The threshold is usually 0.25% or more below your locked rate.
Not all lenders offer float-downs, and those that do have specific rules about when and how often you can use it. Some limit float-downs to one time per lock period, while others require a minimum number of days before closing.
Availability and Cost
Some lenders include a float-down at no extra charge as a competitive feature. Others charge a fee ranging from 0.5% to 1% of the loan amount. A float-down may also require that you pay for it upfront at the time of locking, so read the fine print.
Ask your loan officer whether the lender offers a float-down option and what the specific terms are. In a volatile rate market, a float-down can save you thousands over the life of the loan. Patrick Kevin Fagan recommends asking about this feature when you first apply for preapproval.
