Float Down

A float-down option lets you snag a lower interest rate if the market drops after you’ve already locked your rate — it’s basically an insurance policy against locking too early. Not every lender offers it, and the ones that do usually charge for the privilege.

How It Works

After you lock your rate, you’re normally stuck with it even if rates fall. A float-down provision changes that. If rates drop by a specified amount (usually at least 0.25%), you can request to re-lock at the lower rate. Most lenders allow only one float-down per lock period, and you typically need to exercise it at least 7-15 days before closing.

The mechanics vary by lender. Some split the difference between your locked rate and the new lower rate. Others give you the full drop.

Dollar Example

You lock at 7.00% on a $400,000 loan. A float-down option costs $800 upfront. Two weeks later, rates fall to 6.625%. Your lender floats you down to 6.75% (splitting the difference). Your monthly payment drops by $68, saving you $24,480 over 30 years. That $800 was money well spent.

Watch Out

Float-down provisions often come with restrictions that limit their value. Some require rates to drop a full 0.50% before you can use it. Others only float you down to a rate that’s still above the current market. Read the fine print carefully.

If rates are trending downward and you’re closing soon, it might be smarter to delay your lock rather than pay for a float-down. Talk to your loan officer about timing. Run different rate scenarios through our mortgage calculator to see the payment impact before deciding.

Frequently Asked Questions

Is a float-down option worth the cost?

It depends on market volatility. In a stable rate environment, probably not. But if rates have been swinging 0.25%+ week to week, that $500-$1,000 fee could save you thousands. Think of it like buying a put option on your rate — it only pays off if rates move in your favor. Check current loan comparisons to gauge your potential savings.