Lock or Float Your Mortgage Rate?

What a Rate Lock Actually Does

A rate lock is a simple trade. You give up any benefit if rates fall before closing, and in exchange your lender guarantees today's rate for a set window, usually 30 to 60 days. It is protection bought on the lender's terms, not a prediction that rates will rise.

Floating means you ride the market until closer to closing, betting that rates hold steady or fall. In a calm market that bet often pays off, because lenders price a small cushion into every lock. In a rising market, floating is how buyers end up re-running their numbers a week before closing and finding the payment went up by seventy dollars.

One practical note many buyers miss: a quote from even a few days ago can already be stale by several basis points, roughly $10 to $20 a month on a $400,000 loan for every few basis points of movement. If you are comparing lenders, get fresh quotes from each of them in the same hour, or you are comparing yesterday's market with today's.

The Decision Rule: Your Closing Date Decides

If you are closing within 30 days, locking is the conservative play. With so little time left, a surprise move in the bond market has no room to reverse before you sign. Protection is cheap compared with the alternative: requalifying at a higher payment days before closing.

If you have 45 days or more, floating is a defensible bet, but only with two conditions agreed in advance. First, set a lock trigger with your lender now: a specific rate, say a quarter point above today's quote, at which you lock automatically, no debate in the moment. Second, make sure your budget survives a quarter point more than today's rate, because markets cut both ways.

Two calendar facts shape the timing. Economic data releases (jobs reports, inflation prints, Fed meetings) are the moments rates jump most, so know the next one on the calendar before you choose to float. And bond markets close for holidays, when thin trading can exaggerate moves in either direction.

What the Next Move Costs You in Real Money

On a $400,000 loan over 30 years at 7.40%, principal and interest run about $2,770 a month. A quarter-point rise from there takes the same loan to roughly $2,838 a month, about $68 more, every month, for 30 years. That is the number to put next to your lock trigger.

On a $500,000 loan the payment at 7.40% is about $3,463 a month, and a quarter point adds roughly $85. If $68 a month would break your budget, you do not have a floating budget, and the decision is already made: lock.

Do not anchor too hard on any single decimal from a rate headline. Trackers disagree with each other by a tenth of a point or more on any given day. What matters is the range and the trend, and whether your budget survives the top of the range.

What Does a Lock Itself Cost?

A standard 30 to 60 day lock is typically included in the lender's pricing, not charged as a separate fee. Longer locks, and float-down options that let you take a lower rate if the market improves after you lock, usually cost extra or come with slightly worse pricing.

Ask your lender three questions before you commit: how long is the lock, what happens if closing is delayed past it (extension fees can be steep), and is a float-down available and what does it cost. Get the answers in writing with the lock confirmation.

Run Your Own Numbers

National averages tell you the direction; your own figures tell you the decision. Plug your home price, down payment, and term into our free US mortgage calculator and compare the monthly payment at today's rate against a quarter point and a half point higher, so you can see exactly what the next move costs on the home you are actually considering.

Then call your lender with a number, not a feeling: tell them the rate at which you want to lock, and ask what lock periods and float-down options are on the table. In a rising market, the buyers who get hurt are the ones deciding under pressure a week before closing.

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Sources

The figures and policy details in this article come from the following primary sources, checked at the time of writing.

• CFPB: What is a rate lock on a mortgage?
• Freddie Mac Primary Mortgage Market Survey