Mortgage Rate Locks: When to Lock and When to Float
Last updated · Rate Strategy · Methodology
Once you have a loan estimate, the next decision is when to lock the rate. Lock too early and you may miss out on falling rates. Lock too late and you may get burned by a sudden increase. Most borrowers lock without thinking about it, accepting whatever rate is offered on the day they sign — but understanding how locks work, what float-down options are worth, and when extensions make sense can save you thousands of dollars.
What a rate lock actually does
A rate lock is a contractual commitment between you and the lender that the rate quoted today will be the rate you get at closing, regardless of market movements in between. Locks have a duration (15, 30, 45, 60, 90 days), and longer locks cost more — usually built into the rate itself or as a small fee.
Without a lock, you are "floating" — your rate is whatever the market rate is on the day your loan funds, which could be higher or lower than today.
The standard lock period is 30 to 45 days, designed to cover the typical underwriting and closing timeline. Locks longer than 60 days are rare and usually expensive.
The standard cost of locking longer
Each additional 15 days of lock period typically costs 0.125 percent in either rate or upfront fee. So a 60-day lock might be 0.25 percent above a 30-day lock at the same time.
This is the lender's price for taking on rate risk — they have to hedge the lock through the secondary market, and longer hedges cost more. The cost is real even if you do not see it as a separate fee on the Loan Estimate.
For a $400,000 loan, 0.125 percent in rate equals about $35/month and roughly $12,000 over 30 years. Worth it only if you are confident you will not close within the shorter window.
Float-down options: rarely worth the cost
A float-down option lets you re-lock at a lower rate if market rates drop after you initially locked. It sounds great in theory but usually has restrictive terms:
- Rates must drop by at least 0.25 percent (sometimes 0.50 percent) to trigger.
- You can only use it once per loan.
- It costs 0.25 to 0.50 percent upfront, often more.
- You must request it before closing — cannot use it after locking final closing terms.
Mathematically, float-downs are usually a net negative because the cost is paid regardless of whether rates fall, and the threshold is hard to hit in a short window. They are worth considering only if you expect a major rate event (Fed announcement, significant economic data) within your lock period.
When to lock immediately
Lock as soon as your offer is accepted (not just when you start shopping) in these scenarios:
- Rates are at or near recent lows. Risk is asymmetric — they have more room to rise than fall.
- Your closing is firm at 30–45 days. No reason to float if the timeline is locked in.
- Market is volatile or trending up. Each day of floating risks a higher rate; locking removes the gamble.
- You are financially sensitive. If a 0.25 percent rate increase would meaningfully strain your budget, the certainty of locking is worth the small upfront cost.
When floating is reasonable
Floating (delaying the lock) makes sense in narrower cases:
- Rates have just risen sharply and analysts expect a pullback. (Caution: predictions are often wrong.)
- You expect rate-cutting Fed action within a few weeks and the lock period extends past it.
- Closing is delayed indefinitely (e.g., new construction with unclear timeline) — locking now risks expiration before closing.
Even in these cases, floating is a bet, and the loss from a rising rate is bigger than the gain from a falling rate (because mortgage rates are at the high end of their long-term range). Most borrowers should default to locking.
Lock extensions: math the cost vs the increase
If your closing gets delayed past your lock expiration, the lender will offer an extension — usually 15 days for 0.125 percent of the loan, or 30 days for 0.25 percent. Compare this to the cost of letting the lock expire and re-locking at current market rates.
Example: your lock expires in 5 days. The lender quotes 0.125 percent for a 15-day extension on a $400,000 loan = $500. Current market rates are 0.30 percent above your lock. Re-locking at current market would cost roughly $1,200/year × 30 years = $36,000+ over the life of the loan.
Extension is dramatically cheaper. Almost always pay for the extension if rates have moved against you. If rates have moved in your favor, you may be able to re-lock at the new lower rate without an extension.
Frequently Asked Questions
How long is a typical mortgage rate lock?+
30 to 45 days, designed to cover normal underwriting and closing. Longer locks (60–90 days) cost more and are used for new construction or extended closing timelines.
Can I lock my rate before I have a property under contract?+
Most lenders require an executed purchase contract before locking, but a few offer "rate lock with float-down" or "lock and shop" programs that let you lock for 60–90 days before finding a property. These typically cost 0.25 percent above standard rates.
What happens if my lock expires before closing?+
You will need to extend the lock (usually 0.125 to 0.25 percent for 15–30 days), or re-lock at current market rates. If rates have risen, the extension is cheaper. If rates have fallen, you may be able to re-lock at a better rate without paying for the extension.
Are float-down options worth paying for?+
Usually no. They typically cost 0.25 to 0.50 percent upfront, require rates to drop by a meaningful amount (often 0.25 to 0.50 percent), and can only be used once. The expected value is usually negative.
Can I lock with one lender and close with another?+
Locks are not transferable. If you lock with Lender A and decide to close with Lender B, you start over with Lender B at current market rates. Always have a strong commitment to your lender before locking.
Should I lock if I expect Fed rate cuts soon?+
Mortgage rates do not directly track the Fed funds rate — they are tied to the 10-year Treasury yield, which moves on inflation expectations and economic data. Fed cuts can sometimes push mortgage rates up if markets see them as inflationary. Lock unless you have a very specific reason to believe rates will fall within your closing window.
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