A mortgage rate lock float down is an agreement between a borrower and a lender that allows the borrower to lock in a mortgage interest rate for a certain period of time, but also allows the borrower to "float down" to a lower interest rate if rates fall during that period.
What does it mean to allow interest rate to float?
The term "floating" in reference to interest rates means that the rate is not fixed, but rather fluctuates with the market. When you have a floating interest rate on your mortgage, your monthly payment can go up or down, depending on the movements of the market. This can be a good thing or a bad thing, depending on how rates are moving. If rates are falling, your monthly payment will go down. If rates are rising, your monthly payment will go up. What is the longest mortgage rate lock? The longest mortgage rate lock is typically 120 days, but there are some lenders who offer longer locks of up to 360 days. This gives borrowers more time to shop around for the best mortgage rate and terms. What will interest rates be in 2023? There is no definitive answer to this question as it depends on a number of factors, including economic conditions, inflation, and global events. However, most experts agree that interest rates are likely to rise over the next few years. How do floating interest rates work? Floating interest rates on a mortgage refer to interest rates that move up and down with the market. They are typically tied to the prime rate, which is the rate that banks offer their best customers. The prime rate is influenced by the federal funds rate, which is set by the Federal Reserve.
When the federal funds rate goes up, so does the prime rate. This usually causes mortgage rates to go up as well. When the federal funds rate goes down, the prime rate usually follows suit. This usually causes mortgage rates to go down as well.
The main advantage of a floating interest rate is that it can save you money if interest rates go down. For example, let’s say you have a $200,000 mortgage with a 5% interest rate. Over the course of a 30-year loan, you would pay $186,511 in interest.
Now let’s say interest rates go down to 4%. If you have a floating interest rate, your rate will go down to 4% as well. Over the course of the loan, you would now pay $179,189 in interest – a savings of $7,322.
The main disadvantage of a floating interest rate is that it can cost you money if interest rates go up. For example, let’s say interest rates go up to 6%. If you have a floating interest rate, your rate will go up to 6% as well. Over the course of the loan, you would now pay $195,837 in interest – an increase of $9,326.
Before you decide if a floating interest rate is right for you, it’s important to understand how interest rates are likely to move in the future. If you think interest rates are going to go up, you might be better off with a fixed interest rate. If you think interest rates are going to go down, a floating interest rate could save you money. What happens if you lock in a rate and rates go down? If you lock in a rate, you are agreeing to a set interest rate on your mortgage for a specific period of time. If rates go down after you lock in, you will still pay the locked-in rate.