What If Mortgage Rates Drop After I Lock in My Rate?
Potential borrowers and homeowners who are researching and comparing the various types of home loans available to them may want to learn more about what happens if mortgage rates drop after they have fixed their rates. If mortgage rates drop after a borrower has already locked in their rate, they will be unable to obtain the lower rate without incurring break costs.
However, once break costs have been applied, one may take advantage of a variable or refix at a lower rate. here are options to consider for getting out of a rate lock if mortgage rates drop significantly.
The first option consists of a borrower inquiring with their current mortgage lender about a float-down option, which requires the borrower to pay an additional cost at closing. The cost of a float-down option is generally 0.5% to 1% of the loan amount, and the amount that their mortgage rate decreases largely depends on the market’s current status as well as the borrower’s qualifications.
The second option consists of a borrower cancelling their loan application and switching to a new mortgage lender. This process requires the borrower to cancel their current loan application and begin researching and comparing the various loan options available to them in order to ensure they choose the option with the lowest interest rate possible. Switching to a new mortgage lender can allow a borrower to save largely on loan costs and interest rates.