Mortgage Float Down Option: How to Lock a Rate and Still Catch a Drop

A rate lock protects you if rates rise between application and closing. It does nothing for you if they fall. A float down option closes that gap: you keep the protection of the lock and get one chance to take a lower rate if the market moves your way.

You lock your rate as usual and add a float down provision, either at lock or, with some lenders, afterward. If market pricing improves by at least the required amount while you're locked, you ask the lender to exercise it, and your rate is re-priced to current levels — sometimes with a small adjustment. You generally get to use it once, and it has to happen within a window before closing, often no later than the point when final loan documents are drawn.

• Trigger: rates must fall by a minimum amount, commonly 0.25% to 0.50%, measured against the lender's own rate sheet rather than headline averages.
• Frequency: one exercise per loan.
• Timing: must be requested within the lock period and before a cutoff, commonly a set number of days before closing.
• Cost: an upfront fee — frequently a fraction of a point — or higher pricing built into the original lock, sometimes refundable or credited at closing.
• Request: it isn't automatic. You or your loan officer must ask for it.

Every lender writes its own version, and the details above are typical market terms rather than a commitment. Get the specific trigger, fee, and deadline in writing.

A float down earns its cost when rates are volatile, when your closing is a long way out — new construction is the classic case — and when the size of the loan makes a quarter-point meaningful. On a $750,000 loan at an illustrative 7%, a 0.375% improvement saves roughly $187 a month, which repays a modest float down fee quickly. On a 21-day lock in a calm market, it's usually not worth paying for.

• Floating means not locking at all. You take the full risk of a rise in exchange for full exposure to a drop.
• A standard lock protects against a rise and gives up any drop.
• A float down protects against a rise and captures one drop, for a price.
• An extended lock — 60, 90, or more days for construction — protects longer, also for a price. Some lenders offer float downs specifically on extended locks.

You can ask your lender to renegotiate. Some will, particularly if the drop is large and they'd rather keep the loan than lose it. Switching lenders mid-process is possible but means a new application, possibly a new appraisal, and time — which can put a purchase contract at risk. If rates fall after closing, the answer is a refinance, and the break-even math is the same as always.

Non-QM lenders set their own lock policies, and float downs are less standardized than on agency loans — some offer them, some don't, and terms differ widely. If you're using a bank statement loan or a DSCR loan, ask about lock and float down terms at the same time you compare rates. The rate context is in bank statement loan rates and DSCR loan interest rates. For buyers who want lower payments up front rather than a lower rate, a seller-paid 2-1 buydown is a different tool worth comparing.

If you're about to lock and the market is moving, tell me your closing date and loan amount. I'll tell you whether a float down is available on your program and whether it's worth the cost. Lock and float down policies vary by lender.