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Floating mortgage rate

Should You Lock or Float?


All loans are locked in at some point prior to closing, but should you do it earlier or later? As part eight of our nine part series on the loan process, please consider the following points to help you decide.

Locking In sets or “locks” the interest rate of your loan for a specific number of days. Typical locks run in 15 day increments up to 60 or 90 days. Once set, it’s important for your loan to close within that period, and hence, locking is safe only if you’re sure of the closing date.

Floating is the opposite of locking in and simply means your rate is not yet set. It’s “floating” with the market. If rates are moving down, you can benefit. If rates are moving up, your rate will, too.

Which is best? Unfortunately, “best” can be defined only after the fact. If you float your rate until the last moment and rates fall, you win. If rates rise unexpectedly, you have a higher rate and payment. No one knows for sure which way rates will go. Often, “best” is better determined by your peace of mind. If you will sleep better at night by locking, go ahead. If you’re comfortable with some strategic risk and think rates will fall, then float.

Still undecided? It may help to realize that very few people ever lock at the perfect time. The market is always moving, and there are just too many influences that cannot be predicted. It’s also good to know that once your loan has closed, it’s usually easy to refinance if rates end up moving lower. If rates rise, then you can be comfortable in knowing you secured your rate at the right time.

Bottom line: The difference in rates from offer to close is usually pretty small. Since none of us can predict the future, simply do what will give you the least stress during this process.

Whatever your decision, reach out, and we’ll be happy to help.