Mortgage Rate Lock Float Down

AAA

DEFINITION of 'Mortgage Rate Lock Float Down'

A mortgage rate lock with the option to reduce the locked interest rate if market interest rates fall during the lock period. A rate lock with a float-down option can provide the borrower with security against an increase during the rate lock period, while the float-down option allows the borrower to take advantage of a fall in interest rates during the lock period.

INVESTOPEDIA EXPLAINS 'Mortgage Rate Lock Float Down'

As with any financial option, float-down options on a rate lock have a theoretical value or cost; therefore, rate locks with a float-down option are more expensive than rate locks without. The option will only be exercised by the mortgagor if interest rates fall.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  3. Mortgagor

    An individual or company who borrows money to purchase a piece ...
  4. Mortgage Originator

    An institution or individual that works with a borrower to complete ...
  5. Mortgage Rate Lock

    An agreement between a borrower and a lender that allows the ...
  6. Mortgage Rate Lock Deposit

    A fee that a lender charges a borrower that allows the borrower ...
Related Articles
  1. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  2. How Interest Rates Affect The Housing ...
    Economics

    How Interest Rates Affect The Housing ...

  3. What You Need To Know About Fannie Mae ...
    Investing Basics

    What You Need To Know About Fannie Mae ...

  4. How To Buy Oil Options
    Options & Futures

    How To Buy Oil Options

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center