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Should You Lock—or Float—Your Mortgage Interest Rate?

A big question that many home shoppers have is whether to lock in their mortgage interest rate—or float it and hope that rates will fall.

Locking in an interest rate is when your loan officer sets your rate for an agreed upon period, often 30 to 90 days. The rate is based on what you qualify for as well as the current market.

This way you don’t have to worry about rates going up before you close on your home.

“When you lock in the interest rate, you’re securing the payment and the terms that you originally discussed with the loan officer,” said Lisa Daniels, director of sales training at New American Funding.

“It’s a risk if you decide to float your interest rate,” she said.

If you float your interest rate, this means your rate will depend on current market. So, rates could rise or fall by the time you close.

“The great news is that if rates do fall significantly, many lenders offer the option to float the interest rate down to the market rate with no cost to you,” said Daniels.

Make sure to find out if your lender will lower your rate for free if the market changes before you decide whether to lock or float your mortgage rate.

Lisa Daniels NMLS # 37860