Lock desk
Rate lock and float-down, in plain English
A lock is a contract with an expiry date and a price. Almost nobody explains the price, and almost nobody mentions the float-down window until it has closed.
Lock desk
Lock terms are priced in points, and nobody tells you that
A 45-day lock is not the same product as a 15-day lock at a different expiry. It costs more, because the lender hedges your rate for longer. Here is the spread, on a $340,000 loan.
Base price. Every other term is quoted as a spread from this one.
- Cost on a $340,000 loan
- $0 Sample
Use it when: The file is already clear to close and the settlement date is inside two weeks.
Avoid it when: Anything is outstanding. A 15-day lock that expires costs more than a 30-day lock that did not.
The default for a refinance and for a purchase with a firm closing date.
- Cost on a $340,000 loan
- $425 Sample
Use it when: Appraisal is ordered, income is verified and the contract date is three to four weeks out.
Avoid it when: The appraisal has not been ordered. Richmond appraisal turn times run 8 to 14 days in season.
The realistic purchase lock in a normal Richmond market.
- Cost on a $340,000 loan
- $850 Sample
Use it when: New contract, appraisal not yet back, or a file with self-employment income to document.
Avoid it when: You are refinancing with a value acceptance offer and nothing left to verify.
Long locks carry the cost of the lender hedging your rate for two months.
- Cost on a $340,000 loan
- $1,275 Sample
Use it when: New construction with a firm delivery date, or a contingent sale with a defined settlement.
Avoid it when: The delivery date is a guess. A 60-day lock on a house finishing 'sometime in spring' will expire.
Extensions are priced by the day, not by the week
A typical extension runs 0.03 points per day, billed in blocks. Seven days on a $340,000 loan is roughly $714. Extensions are cumulative, and most desks cap them at 30 days before the lock must be re-priced.
A blown lock is re-priced at worse of
If the lock expires, the lender re-prices at the worse of the original lock price or current market. You never get the benefit of a market that improved while you were expired, so the discipline is to lock long enough the first time.
Float-down is an option you buy, not a right
Most wholesale desks offer one float-down per loan, exercisable once between lock and clear-to-close. The usual trigger is a market improvement of at least 0.250% in the base rate, and the cost is around 0.125 points added at exercise.
The float-down window closes before you think
Float-down normally has to be exercised at least 7 days before closing and after the file is out of underwriting. Ask for the exact deadline the day you lock, and put it in your calendar.
Re-locking after a cancellation carries a penalty
Break a lock at one desk and move the file elsewhere and you may face a 30 to 60 day cooling period at the original lender. Broker files can move, but it is not free, so we choose the desk carefully the first time.
Locking is a decision about risk, not a prediction
Nobody at any desk knows where rates go next. The question is what happens to your budget if the rate moves half a point against you before closing. If the answer is that the purchase fails, lock.
Worked example
What exercising a float-down actually looks like
Sample float-down, $340,000 loan, 45-day lock
The threshold is met, the fee is real, and the recovery period is short enough that it is an easy decision. The hard part is not the arithmetic. It is knowing the option exists, knowing the trigger, and calling before the window closes seven days out from settlement.
| Line | Figure |
|---|---|
| Rate locked on day 1 | 6.625% |
| Principal and interest at lock | $2,177 / month |
| Market on day 22 | 6.250%, a 0.375% improvement |
| Float-down threshold met | Yes, 0.375% exceeds the 0.250% trigger |
| Float-down fee | 0.125 points, $425 at closing |
| New principal and interest | $2,093 / month |
| Monthly saving | $84 |
| Months to recover the fee | 5.1 months |
Decide it once
Lock or float, in four questions
- 01
What payment breaks the purchase?
Work out the monthly figure at which your debt-to-income no longer qualifies or your budget no longer works. If a half-point move against you crosses that line, lock today.
- 02
What is the real settlement date?
Not the optimistic one. Appraisal turn times in Richmond run 8 to 14 days in season, and a self-employed file adds a week of documentation. Choose the lock term against that date plus a margin.
- 03
Does this desk offer a float-down?
Ask on the day you lock. Get the trigger, the fee and the deadline in writing, and put the deadline in your calendar rather than trusting anyone to remind you.
- 04
What happens if the file slips a week?
Seven days of extension on a $340,000 loan is roughly $714 at 0.03 points per day. A 45-day lock instead of a 30-day lock would have cost $425. Buy the longer lock.
Lock when a rate move against you would break the purchase. Locking is a risk decision, not a prediction. Choose a term that reaches your real settlement date with a margin, because extensions run about 0.03 points per day and a blown lock re-prices at the worse of the two markets.
An option most wholesale desks offer once per loan. If the market improves by at least 0.250% after you lock, you can take the better rate for a fee of around 0.125 points. It normally has to be exercised at least seven days before closing and after the file leaves underwriting.
The annual percentage rate folds the finance charges into a single yearly figure, so a loan with points and fees shows a higher APR than its note rate. It is useful for comparing two loans of the same type and term, and misleading for anything else.
It depends entirely on how long you keep the loan. A point costs 1% of the loan amount and typically buys about 0.250% in rate. Divide the cost by the monthly saving to get the break-even month, then compare that honestly against your plans.
Locked somewhere else and unsure
Send me the lock confirmation. I will read it and tell you what it actually says about extensions and float-downs, whether or not the loan is mine.
Three wholesale quotes on the same day's pricing, before you choose.