When you’re shopping for a mortgage, the interest rate you lock in can make a major difference in your monthly payments and total loan cost over time. That’s why many buyers choose to secure their rate early with a rate lock—protecting them from potential increases during the home loan process.
But what if rates go down after you’ve locked in? That’s where a float-down option can offer real value.
Let’s explore what a float-down mortgage option is, how it works, and whether it’s worth it for you.
What Is a Float-Down Option?
A float-down option allows you to take advantage of lower interest rates even after you’ve locked in your mortgage rate. If rates drop within a specific window before closing, a float-down gives you a one-time opportunity to adjust your locked rate to a lower one—potentially saving you thousands over the life of your loan.
At V.I.P. Mortgage Las Vegas, we believe in giving our borrowers every advantage possible. That includes education on tools like float-downs, even if they’re not the right fit for everyone.
How Do Float-Down Options Work?
To use a float-down, you’ll need to lock your interest rate with a float-down provision in place. Not all lenders offer this, and each one has its own rules.
Here’s what’s typical:
- You lock in your rate (e.g., 6.5%)
- The lender sets a threshold for a rate drop (e.g., 0.5%)
- If rates fall to 6.0% or lower before closing, you may activate the float-down
It’s important to note: this isn’t automatic. You must request the float-down—and the lender must approve it.
How Much Does a Float-Down Cost?
Float-down fees generally range from 0.25% to 1% of your loan amount.
For example, on a $400,000 loan:
- A 0.5% float-down fee = $2,000
Whether it’s worth it depends on how far rates drop—and how long you plan to keep the mortgage.
When Does the Float-Down Expire?
Most float-down options expire when your rate lock period ends (usually at closing). Some lenders also require you to exercise the float-down 5 to 15 days before your scheduled close date.
This means timing is everything. We monitor rate movements closely for our clients to help you decide when—and if—to float down.
Is It Worth Paying for a Float-Down?
The answer? It depends.
Let’s say your float-down option costs $2,000. If it lowers your rate enough to save $50/month, it will take 40 months (over 3 years) to break even.
If you’re only planning to stay in the home for a couple years, the math may not work in your favor. But if you’re buying your forever home, the long-term savings could be significant.
Pros and Cons of Float-Down Options
Pros:
- Take advantage of falling rates even after locking
- Potentially lower monthly payment
- Long-term interest savings
- Peace of mind knowing you’re covered in both directions
Cons:
- Comes with an upfront fee
- Must hit lender’s required rate drop threshold
- May not save money if you sell or refinance before break-even point
- Not offered by all lenders
Other Ways to Lower Your Rate
If you’re not sure about paying for a float-down, here are a few other options:
- Refinance later if rates drop
- Choose an adjustable-rate mortgage (ARM) to benefit from lower starting rates
- Use discount points to permanently buy down your interest rate
We’ll help you compare every option so you can make the most informed—and financially sound—decision.
Final Thoughts: Lock or Float?
A float-down mortgage option offers a strategic middle ground: lock in now to protect yourself, but stay flexible in case the market turns in your favor.
At V.I.P. Mortgage Las Vegas, we tailor your mortgage experience to your financial goals—not just today, but for the future. Whether a float-down makes sense for you depends on your timeline, budget, and outlook—and we’re here to help you evaluate all of it.
Ready to explore your mortgage options with a team that puts you first?
Let’s talk about your loan, your goals, and the smartest path forward—together.
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