Floating vs. Locking Your Interest Rate: What Every Homebuyer Should Know
When you’re buying a home, one of the most important decisions you’ll make—aside from the home itself—is when to lock in your interest rate. I get this question all the time:
“Should I lock my rate now, or wait and see if it drops?”
Let’s break down what “locking” really means, and the pros and cons of both locking and floating your rate so you can make a confident, informed decision.
What Does It Mean to “Lock” a Mortgage Rate?
Locking your rate means your lender guarantees a specific interest rate and pricing for a set period—typically 15, 30, 45, or 60 days—while your loan is processed.
Even if market rates rise during that time, your rate and related costs stay the same as long as you close before the lock expires.
Think of it as an insurance policy against rising rates. It protects you from volatility in the market while you finalize your home purchase.
What Does It Mean to “Float” a Rate?
Floating your rate means you’ve decided not to lock yet. You’re waiting to see if rates improve before committing. If rates drop, great—you can lock at the lower rate. But if rates rise, your payment could increase.
Floating can make sense in certain market conditions—but it’s a risk vs. reward decision. Mortgage rates can move daily (and sometimes multiple times per day), often based on things like inflation data, economic reports, and Federal Reserve comments.
Think of it like the stock market – a stock price fluctuates all the time. In the same way, the bonds that are used to control the interest rates are also moving up and down in the same fashion – this has a direct impact on the rates being offered.
Pros and Cons of Locking Your Rate
✅ Pros:
Protection from rate increases: Your monthly payment won’t change if rates rise.
Peace of mind: You can focus on the homebuying process without worrying about market swings.
Budget certainty: Great for buyers working within tight debt-to-income or approval limits.
⚠️ Cons:
You won’t benefit from rate drops (in most cases): If rates fall after you lock, you’re generally locked in—unless your lender offers a “float-down” option. This varies by lender including the amount rates have to improve to take advantage of.
Lock expirations: If your closing is delayed, extending a lock can cost money.
Pros and Cons of Floating Your Rate
✅ Pros:
Potential to catch a lower rate: If rates drop, you can lock at the better pricing and save money.
Flexibility: Helpful if your closing is far out or the market looks favorable.
⚠️ Cons:
Exposure to market risk: Rates can rise unexpectedly, and even small increases can add up fast.
Less predictability: Your monthly payment and closing costs could change at any time.
Stress factor: Watching the market can feel like trying to time the stock market—it’s unpredictable.
How I Guide My Clients
We walk our clients through rate trends and market outlooks before deciding whether to lock or float. We look at factors like:
How soon you’re closing
Current rate volatility
Your tolerance for risk
Upcoming economic events (Fed meetings, inflation reports, etc.)
For most buyers—especially those within 30–45 days of closing—locking in is the safer and smarter move. But for clients closing further out or refinancing with flexibility, we might discuss a float strategy or lock with a float-down option, if available.
Final Thoughts
Locking or floating isn’t about predicting the market—it’s about managing your risk and protecting your goals.
If you’re unsure which path makes sense for your situation, let’s talk through the numbers and timing. We’ll help you make a confident choice that fits your budget and timeline.
