A float-down option lets you lower your locked interest rate if market rates drop before closing. Some lenders offer this automatically as a one-time courtesy. Others charge a fee upfront or at the time of the float-down. You should always ask about the float-down policy before locking your rate.
How the Float-Down Works
After you lock a rate, your lender monitors market rates. If rates drop by a certain threshold (typically 0.25% or more), the float-down lets you adjust to the lower rate. The lock period and date remain the same only the rate changes.
When a Float-Down Is Available
Not all lenders offer float-downs. Some reserve them for certain loan programs or require them to be purchased upfront (1-2% of the loan amount). Others offer a free one-time float-down within the first 30-60 days of the lock period.
The Cost of a Float-Down
A float-down can cost 0.125% to 0.5% of the loan amount. On a $350,000 loan, that is $438 to $1,750. Some lenders waive the fee if rates drop significantly (e.g. more than 0.5%). Always ask about the fee structure upfront.
Float-Down vs No Float-Down
- With float-down: You benefit if rates drop, but may pay a fee.
- Without float-down: You keep the locked rate regardless of market changes, no fee.
When to Request a Float-Down
Request a float-down when rates drop by at least 0.25% after you lock and the savings outweigh the fee. If rates are volatile or you locked with a long closing timeline, a float-down clause gives you peace of mind.
