After spending weeks or months shopping around for the best interest rate, how can you as the consumer protect yourself from paying more on your mortgage than you have to? In these volatile economic times ensuring you get the lowest interest rate on your mortgage can seem like a daunting task. It’s just a guessing game full of speculation. Do you sign now or wait for interest rates to decline. What if you wait too long and all of a sudden there is a jump in the market? How can you protect yourself?
Some lenders provide an option called a mortgage rate lock float down. The rate lock portion allows borrowers to secure themselves from rate increases while the float down portion gives them the benefit of obtaining a lower interest rate if mortgage rates go down. Basically a mortgage rate lock float down allows you to lock in at a specific rate. However, if interest rates fall at any point in the application process you can still get the lower interest rate.
Here’s how it works. Let’s imagine a borrower locks in a rate of 4.5% when applying for a first time home buyer 30 year FRM (fixed rate mortgage). However, if the borrower has a mortgage rate lock float down and interest rates drop to 4.0% prior to the completion of the mortgage application then the borrower may take advantage of the lower rate before the mortgage is approved.
Getting caught off guard and suddenly finding that your interest rate has gone down just before closing is not only frustrating after spending so much time and energy sourcing out the best rate; it can also cost you thousands of dollars in unnecessary interest fees. You can avoid paying more than you have to with a mortgage rate lock float down. If mortgage rates decline during the mortgage application process, you can take still take advantage of lower rates if there is a sudden drop in the market. With a rate lock float down you get the benefit of locking in your rate when it is low and if rates decrease even more you can still benefit from that as well.
Aurora Financial is a Direct DE FHA Lender that has funded consumers with billions of dollars in loans across the United States. A rated on Angie’s List and a five star rating on Google, we promise excellent service and low rates. We are able to close loans in as little as 7 days. Call us today at 877-887-1117.