What Happens If Rates Drop After You Lock?

What a Rate Lock Actually Means

A rate lock is a binding commitment from the lender to honor a specific interest rate for a set period (typically 30-60 days). Once locked, your rate won't go up, but it also won't go down unless you have a float-down provision. The lock protects you from increases but doesn't guarantee the best possible rate.

Float-Down Options

A float-down lets you lower your locked rate if market rates improve. Two types:

• One-time float-down: you get one chance to lower your rate before closing (most common).
• Multiple float-down: rare but available with some lenders.

Float-downs typically require paying a fee (0.25-0.5% of loan amount) or accepting a slightly higher locked rate upfront.

What If Rates Drop Significantly After You Lock?

Here are your options:

• Ask your lender to renegotiate (unlikely but possible in extreme drops).
• If you haven't locked yet, you can wait.
• If you have a float-down, use it.
• If you have neither, you're locked at your current rate. Some lenders will let you re-lock at a higher cost.

Should You Wait to Lock?

Never try to time the market perfectly. Lock when you find a rate you're comfortable with and the monthly payment fits your budget. If rates drop further, you can always refinance later. The risk of rates going up while you wait is almost always greater than the reward of catching a temporary dip.

Float-Down vs No Float-Down: Cost Comparison