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

The two most important terms to understand when it comes to mortgage law in North Carolina are rate lock and float-down. A rate lock is a guarantee from a mortgage lender that the borrower will be given the exact interest rate that was agreed upon at the time of signing the mortgage agreement. This rate is then locked in for a set period of time, so there is no risk of the interest rate changing throughout the duration of the mortgage. A float-down, on the other hand, is an option that borrowers can take advantage of when interest rates go down. This gives borrowers the ability to adjust the terms of their loan to take advantage of lower rates without having to lock in a rate at the time of signing the mortgage agreement. The float-down typically must be agreed upon within a certain period of time after the mortgage agreement is signed and will not come with a guarantee of the lowest interest rate available at the time. In conclusion, the primary difference between a rate lock and a float-down is that a rate lock gives borrowers the guarantee of the exact interest rate that was agreed upon at the time of signing the mortgage agreement, while a float-down gives borrowers the opportunity to adjust the terms of their loan when interest rates drop.

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

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