You locked your rate three weeks ago at 6.75%, and today's posted rate sits at 6.375%. Should you pay the float-down fee, start over with a new lock, or ride out your existing commitment?
Understanding your three options
Most lenders offer a float-down for a fee—typically 0.25% to 0.50% of the loan amount, paid at closing. If you're borrowing $400,000, that's $1,000 to $2,000. In exchange, the lender adjusts your rate partway toward the current market rate, subject to the program's rules. Some float-downs cap the improvement at 0.25% or 0.375%; others require rates to drop by a minimum threshold before you qualify.
A re-lock means canceling your original lock and starting fresh at today's rate. You'll pay a new lock fee (often 0.25% to 1.00% of the loan amount, depending on the lock period). The clock resets: if you choose a 30-day lock and your appraisal takes two weeks, you have only 16 days left to close before you need an extension—which costs extra.
The third path is riding it out: you keep your existing lock, close on schedule, and accept the higher rate. No additional fees, no re-underwriting delay, no extension risk.
These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
When each option makes sense
Choose a float-down when the rate drop is modest (0.25% to 0.50%), you're ten days or fewer from closing, and the float-down fee is materially lower than a re-lock fee. The benefit is capped, but so is the execution risk.
Pick a re-lock when rates have fallen sharply (0.50% or more), you're early in the process with 20+ days to closing, all conditions are clear, and the net savings over the life of the loan exceed both the re-lock fee and any extension-fee exposure. Run the numbers: a half-point rate reduction on a $400,000 thirty-year loan saves roughly $120 per month; over five years that's $7,200. A $1,600 re-lock fee pays for itself in fourteen months.
Ride it out when the drop is small (under 0.25%), you're close to closing, or you've already extended your lock once. Every day you wait is another day rates can reverse. Lock extensions typically cost 0.125% to 0.25% per fifteen-day period; two extensions can erase the entire benefit of a modest improvement.
The risk neither option eliminates
Rates move both directions. A float-down or re-lock captures today's rate, but if you re-lock and then encounter a three-week appraisal delay, you may need an extension at the same cost you just paid to re-lock. Neither strategy protects you from that scenario.
The Alliance take: pencil out the hard costs—float-down fee, re-lock fee, probable extension fee—against the monthly payment change and your expected holding period. If the math is close, favor the simpler path with less execution risk. If you'd like to model your specific scenario or compare lock structures, start an application and our team will walk through the numbers with you.