Note that you do not pay these fees at the time of the floatdown. On the contrary, it is added to the remaining completion costs. 1% is still relatively favorable compared to the level of interest rates you probably save in the long run. But a floating option isn`t always worth it. Your rate must fall low enough to justify the costs. Because of these challenges, the lender`s strategy is not great, unless you are between a rock and a hard place, locked up with a lender that has high rates and has no floating option. Either a simple price freeze or a float-down can provide security against price fluctuations, especially at a time when prices are not moving well. 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. And if you think interest rates should go down much further, there is always the possibility of blocking with a lender that offers a float-down system as protection. Go shopping and compare your options today. Borrowers can apply, at any time prior to the mortgage closing, to exercise the Float-Down option in order to benefit from a lower mortgage interest rate.
The Float-Down option may take place one week after the start of the mortgage procedure, depending on the terms and conditions with the lender. The terms should define the time within which the lock is present, which can be 30 or 60 days. The period allows the borrower to enjoy the benefits of improving interest rates while the mortgage application is processed. The decision to levitate your mortgage interest is much riskier than locking up, because you really can`t predict what mortgage rates will do on a day-to-day basis. A «floating» mortgage interest rate is subject to daily market fluctuations. If the interest rate goes up when you close your mortgage, you lose some purchasing power. If the rate goes down, you gain a little buying power. You can get out of a mortgage, but there are consequences. To get out of a tariff freeze is to give up the application in which you invested time and money.