What is the difference between locking-in or floating my interest rate?
When reserving your funds, you may want to consider whether interest rates are likely to rise or fall due to market conditions during the period between your loan approval and closing. If you think rates are going to rise, you might want to lock-in the current interest rate. When you lock-in a rate, some lenders require that you pay a fee to guarantee the rate. If you think rates might fall, it might be in your best interest to “float the rate” — that is, contact the lender at a later date to lock-in the rate, or wait until several days before closing for your final rate to be set. Keep in mind that the interest-rate market may move in a direction other than you expect. If you lock-in a rate, and rates fall, you won’t be able to take advantage of the lower rate. Likewise, if you float the rate and rates rise, the loan will be subject to an increased rate, which may affect your ability to qualify for the loan.
