Floating vs. Locking a Mortgage Rate: What’s the Difference?

When securing a mortgage, one of the most important decisions you’ll make is whether to lock in your interest rate or let it float. This choice can impact your monthly payment and the total cost of your loan. Understanding the difference between these two options can help you make the best financial decision for your situation.

What Does It Mean to Lock a Mortgage Rate?

A rate lock means your lender guarantees a specific interest rate for a set period—usually 30, 45, or 60 days—while you finalize your mortgage. Even if market rates rise during this time, your rate stays the same.

Pros of Locking Your Rate:

✔ Predictability – You know exactly what your rate will be, allowing you to budget accordingly.✔ Protection – If rates go up, your rate remains unchanged.✔ Peace of Mind – You won’t have to monitor market fluctuations daily.

Cons of Locking Your Rate:

✖ Missed Opportunities – If rates drop after locking, you might miss out on a lower payment.✖ Expiration Risk – If your loan doesn’t close before the lock expires, you may need to extend it, which could come with a fee.

What Does It Mean to Float a Mortgage Rate?

Floating your rate means you choose not to lock in and allow it to fluctuate with the market until you’re ready to close. This option can be risky, but it might work in your favor if rates decrease before your loan is finalized.

Pros of Floating Your Rate:

✔ Potential Savings – If rates drop, you can secure a lower interest rate and monthly payment.✔ Flexibility – You can monitor the market and lock in at the right time.

Cons of Floating Your Rate:

✖ Uncertainty – Rates can rise unexpectedly, increasing your monthly payment.✖ Stressful Decision-Making – Watching market trends can be challenging, especially with unpredictable rate shifts.

Which Option is Best for You?

• If rates are rising or you prefer stability, locking your rate is the safer choice.

• If rates are trending downward and you’re comfortable with risk, floating might be worth considering.

• Your lender may also offer a float-down option, which lets you lock in a rate but take advantage of a lower rate if the market improves.

Final Thoughts

Deciding between floating and locking your mortgage rate is an important step in the home loan process. If you're unsure which option is best for you, working with a knowledgeable mortgage professional can help you make an informed decision. If you're in the market for a home and want expert guidance, feel free to reach out—I’d love to help you navigate your options!