Float Down Option Calculator

Float-downs are optionality. This calculator sizes expected value.

Loan amount

Locked rate

Expected decline bps

Probability %

Term years

Float-down fee %

Expected value

$325,000

Full benefit if triggered

$1,000,000

Upfront fee

$25,000

How the math works

Full benefit = loan × decline × term. Expected = benefit × probability − fee.

Float-down options price fairly when markets are volatile but can be expensive optionality in calm markets. Run the expected value calculation honestly — most borrowers over-weight the scenario of rates declining and under-weight the fee drag if rates stay flat.

How to Use

Enter loan amount.
Enter locked rate %.
Enter expected market rate decline %.
Enter probability of decline %.
Enter loan term years.
Enter float-down fee %.
Read expected value of option.

Frequently Asked Questions

Float-down structures?

One-time reset to market rate before closing. Usually fee 5-25 bps. Requires specific trigger (market drop >25-50 bps) and timing window. Not all lenders offer — more common on CMBS and large life co loans.

Value of option?

When markets volatile, option value higher. Recent years with 100-300 bps annual swings: float-downs worth 15-50 bps in expected value. Calm markets: option values drop to 2-10 bps. Pay accordingly.

Gotchas?

Trigger must be specific (usually Treasury + spread). Timing window short (often 5-10 business days before closing). Some lenders cap the float-down benefit at 25-50 bps regardless of market. Read the fine print.