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Not if you`ve locked with the added option of a floatdown. So why do lenders offer float-downs to borrowers? Of course, they want to keep your business, and if you are a well-qualified customer who could go elsewhere to get a loan, they are especially open to allowing that small margin if that means you are staying around. “A float-down allows you to hold back your interest rate, but if the interest rate drops during the amortization process, the lender will borrow at a lower interest rate,” says Mark Livingstone, president of Cornerstone First Financial, a mortgage lender in Washington, D.C. But if interest rates go up, you`ll still get the rate previously blocked. Here`s a second scenario: you lock in a mortgage interest rate, then the interest falls, and your lender doesn`t offer a float-down provision. Or your lender can`t offer you a low rate to justify. Lenders will probably demand more for floatdowns than for a simple interest rate freeze. While some may offer a free float-down, you will usually find that these are with more restrictive conditions than those for which you pay. Make sure you also understand the prices – you may decide that it is unlikely that prices will drop enough in the near future to offset the extra costs of the flood and opt instead for a simple lock-in. It is important not to confuse a floatdown with a buy-down. The latter is when you pay large pre-payment points (also paying in thousands) to get a lower interest rate. Buy-downs are great if you have a lot of money lying around, but this is rarely the case for someone who lends money to buy a house.

And while buy-downs are great savers, they certainly don`t offer a wobbly space. They buy, block, the period. And even if you float-down, if interest rates go down and you hit yourself to get one, all is not lost. You can still refinance your loan six months later. Of course, refinancing costs money and is a pain, but it is worth it if you want to save money in the long run. In other words, a castle with a float-down offers the best of both worlds: tranquility when interest rates rise, and a safety net when interest rates fall. They are covered in one way or another. For example, you can float on a 4.5 percent blocked interest rate on a 30-year mortgage and two weeks later you can see that the lender is advertising an interest rate of 4.25 percent for a 30-year loan. That doesn`t necessarily mean you can go down to that 4.25 percent – it could be for another product, with higher fees or for borrowers with a better credit rating than you. You need to make sure you can compare apples with apples – and know what it will be before you engage in a float-down. On the other hand, for a float-down, you pay a relative embarrassment (usually several hundred dollars) to keep your options open in order to take advantage of the benefits of lower prices in the event of disappearance.

The longer your fleet, the higher the cost, but we always talk about hundreds of dollars instead of thousands. It is therefore certainly the group`s option that is in favour of the budget. Suppose a borrower finds a home and makes an offer. You are in the process of signing the mortgage before closing in 30 days. The borrower chooses to take advantage of a float-down option, as interest rates have fallen in recent months. Here`s how their Lock Float-Low option rate may look like: Getting a mortgage for a home isn`t for the faint-minded. There`s so much money at stake – and so many scary terms to learn, from “ARMs” to “points” (discounts or base) and more! But if there is something forgiving about the whole process, it is encapsulated in a term you certainly want to learn: “float-down.” What is a float-down? If you`ve already blocked a mortgage rate, discuss float down options with your lender.