You locked a rate three weeks ago. Now rates have fallen half a point, but your closing is delayed and your lock expires in five days. You face two options: extend your existing lock at the original rate, or pay for a float-down to capture the new, lower rate. Most borrowers assume the float-down always wins. The math often shows otherwise.
How lock extensions are priced
Most lock extensions cost 0.125% to 0.25% of the loan amount per week. On a $400,000 loan, a two-week extension at 0.125% per week costs $1,000. The extension keeps your original rate alive until the new closing date. You pay the fee at closing, and your monthly payment stays exactly what you locked.
How float-downs are priced
A float-down lets you re-lock at a lower rate before closing, but the privilege typically costs 0.50% to 1.00% of the loan amount—paid as an upfront fee or rolled into closing costs. On that same $400,000 loan, a 0.75% float-down fee is $3,000. These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
The fee is fixed; the rate improvement is not. If the market rate dropped from 6.75% to 6.25%, you capture that 0.50% reduction. Your monthly principal-and-interest payment on $400,000 drops roughly $120. Over thirty years that's significant savings, but the payback math depends on how long you hold the loan.
The break-even calculation
Divide the float-down fee by the monthly payment savings. If the float-down costs $3,000 and saves $120 per month, you break even in twenty-five months. Refinance or sell before that, and the extension was cheaper. Stay past twenty-five months, and the float-down wins.
Now compare that to the extension cost. If a two-week extension costs $1,000 and preserves your higher payment, the float-down needs to save you more than $1,000 over your expected holding period to justify the extra $2,000 in upfront cost.
The timing friction borrowers miss
Rate improvements late in the process create urgency, but float-down paperwork takes time—often several days for underwriting to re-clear the file at the new rate. If your lock expires during that window, you may need a short extension anyway, stacking costs. Many borrowers pay both the extension fee and the float-down fee because the timing did not align.
The other friction: appraisal or title delays. If the closing slips again after you float down, you are extending a lock you paid extra to obtain. That compounds cost quickly.
The Alliance take
Run the numbers with your loan officer before choosing. If you plan to refinance within two years or the rate drop is modest, the extension is usually cheaper. If you are holding the loan long-term and the rate fell substantially, the float-down pays off. The decision is not emotional—it is arithmetic, and the timeline matters as much as the rate. When you are ready to lock or need to evaluate your options mid-process, start an application and we will walk through the scenario with your actual figures.