What is the difference between a rate lock and a float-down?

A rate lock and a float-down are two different options that can be important when obtaining a mortgage loan in New York. A rate lock is a guarantee that the borrower will get the current interest rate offered by the lender for a specified period of time, usually 30, 45, or 60 days. During this time, the lender will not change the interest rate, regardless of changes in the overall market. Rate locks typically cost money and the borrower is responsible for the fee. A float-down is an option that allows the borrower to lock in a lower interest rate if markets dip during the period of the loan lock-in. The borrower must pay a fee for the float-down option upfront, however if the interest rate does drop, the borrower can take advantage of it without having to pay an additional fee. This option gives the borrower more flexibility and allows them to take advantage of a lower interest rate if the market changes. Overall, the main difference between a rate lock and a float-down is that a rate lock guarantees the borrower a certain interest rate for a set period of time, while a float-down gives the borrower the opportunity to take advantage of a lower interest rate if the market changes within that period of time.

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What is the difference between a rate lock and a float-down?

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