What is the difference between locking or floating my interest rate?
When the borrower chooses to lock-in the interest rate, the lender takes the risk of interest rates increasing during the period of time from lock-in to loan closing. The down side is if interest rates fall, the borrower is locked in at the higher interest rate. The benefit is the security of knowing the interest rate is locked in if interest rates should increase. When floating the interest rate for any amount of time, the borrower takes the risk of interest rates increasing during the period from application to the time of lock-in. The downside to this, of course, is if interest rates increase during this time, the borrower is subject to the then current higher interest rates. The benefit would then be if interest rates went down, the borrower would have the option of a lower interest rate than if locked in previously. The decision of whether to lock-in or not is a personal choice. The borrower needs to decide just how much risk to take.
