Can You Get a Lower Rate After Locking?

Mortgage interest rate locks are a common feature in the home-buying process, designed to provide financial certainty. Many prospective homeowners wonder if they can obtain a more favorable interest rate if market conditions shift after their initial rate is secured. Understanding rate locks and potential adjustments helps borrowers navigate fluctuating financial landscapes.

The Nature of Mortgage Rate Locks

A mortgage rate lock is an agreement between a borrower and a lender that guarantees a specific interest rate for a set period, typically from the initial quote until the loan closes. This commitment protects the borrower from potential increases in interest rates during loan processing. If market rates rise after a rate lock, the borrower’s agreed-upon rate remains unchanged, provided the loan closes within the specified window and no significant application changes occur.

Rate lock periods commonly range from 30 to 120 days, though some can extend longer, especially for new construction loans. While a rate lock provides stability against rising rates, it means that if market rates decline, the locked rate will generally not automatically adjust downward.

Strategies for Securing a Lower Rate

Even after locking a mortgage rate, borrowers may have options to secure a lower rate if market conditions become more favorable. One primary mechanism is a “float-down” option, if offered by the lender. A float-down allows a borrower to adjust their locked rate to a new, lower market rate should rates drop before the loan closes. Lenders offering a float-down option typically require market rates to fall by a specific threshold, often ranging from 0.25% to 1% below the original locked rate, before the option can be exercised.

Borrowers usually need to initiate the float-down request, as it does not happen automatically. Some lenders might also permit a “repricing” of the loan, which is another term for re-locking at a lower rate, often for a fee. This feature must be part of the initial rate lock agreement, as not all lenders provide this option. If a float-down is not available, borrowers might consider starting a new application with a different lender if the rate drop is significant enough to outweigh the effort and potential costs of restarting the process.

Considerations for Rate Adjustments

When attempting to adjust a mortgage rate after it has been locked, several practical considerations and conditions come into play. Lender policies dictate whether a rate adjustment is possible and under what terms. Many lenders charge a fee for a float-down option, which can range from 0.25% to 1% of the total loan amount, or sometimes a flat fee. Borrowers should evaluate whether the potential savings from a lower interest rate outweigh these upfront costs.

Eligibility criteria for float-down options often include the loan being conditionally approved, meaning the lender has reviewed the borrower’s credit, income, and assets. The timing of the request is important; lenders typically set a window, such as requiring the float-down to be exercised a minimum of 5 to 15 days before the scheduled closing. The option generally expires when the initial rate lock period ends.

A locked rate can still change if there are material modifications to the loan application, such as changes in the loan amount, credit score, or verified income. If the loan does not close within the initial lock period, borrowers may have the option to extend the lock, often for an additional fee that varies by lender and duration, typically ranging from 0.25% to 0.5% of the loan amount. Careful communication with the lender and a clear understanding of the rate lock agreement’s fine print are important to navigate these potential adjustments.