Rate Lock vs. Floating Rate
Borrowers can lock in a specific interest rate for a set period while their loan processes, or let the rate float and remain subject to daily market changes until they choose to lock or reach closing.
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Rate Lock
The borrower locks in a specific interest rate for a defined period, protecting against rate increases while the loan processes toward closing.
- Protects against rate increases during the loan processing period
- Provides payment certainty for budgeting purposes
- If rates fall after locking, you typically don't benefit unless a float-down option is included
- Extended lock periods beyond the standard window often carry an added cost
Floating Rate
The borrower doesn't lock a rate immediately and instead lets it float with the market, choosing to lock at some point before closing.
- Can benefit if market rates decline before you choose to lock
- No lock fee if you don't need an extended lock period
- Exposed to the risk of rate increases before locking
- Requires closely monitoring the market and timing the lock decision
Which one makes sense for you?
Locking a rate provides certainty and protection against rate increases, which is the more common and generally safer choice for most buyers, especially closer to closing. Floating can pay off if you're confident rates will decline and you're comfortable with the added risk, but it requires active monitoring and a clear plan for when to lock.
Key cost factors.
- Current rate environment and its recent volatility
- How far out your expected closing date is
- Your risk tolerance for a rate potentially increasing before closing
- Whether your lender offers a float-down option with the lock
Before you decide.
- How long is the standard rate lock period, and does it cover my expected closing date?
- Does this lender offer a float-down option if rates improve after I lock?
- What's the cost to extend the lock if my closing gets delayed?
Frequently asked questions.
What happens if my closing gets delayed past my rate lock period?
Most lenders offer a lock extension, often for a fee, though terms vary — it's worth asking about extension policies and costs before your original lock period runs out.
All figures on this page are illustrative examples for general education, not quotes, appraisals, or guarantees of actual pricing. Actual costs vary by provider, location, project scope, and market conditions — always get a specific quote before making a purchasing decision.
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