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Rate Lock Float Down Calculator
A float-down lock lets you re-price to a lower rate if market rates drop during your lock period. Costs 0.125-0.375% extra upfront. This calculator evaluates whether it's worth the premium.
Net expected value of float-down
$6,141
Prob-weighted savings
$7,141
Float-down fee
$1,000
Savings if drop occurs
$23,803
How the math works
$400K, 0.25% fee = $1,000. 30% prob × 0.25% drop = $75K lifetime savings × 30% = $22,500 expected. Net value $21,500. Big positive.
Most accurate when rates are high and Fed is signaling cuts. Skip if rates are at recent lows or stable. Negotiable — ask lender for free float-down if rates drop.
How to Use
- Enter standard lock rate, float-down rate, and float-down fee.
- Estimate probability and expected size of rate drop.
- See expected value of the float-down option.
Frequently Asked Questions
When is float-down worth it?
In volatile rate environments or long lock periods (60+ days). If you're locking when rates are near recent highs and Fed signals cuts, float-down can be valuable.
How much drop to recover fee?
A 0.125% float-down fee on $400K = $500. To recover with lifetime payment savings, need rate to drop 0.125% and qualify for drop. 10-25% of floats are exercised.
Float-down vs extension?
Different purposes. Float-down: rates go DOWN and you benefit. Extension: rates go UP but you keep old lock. Both protect against rate changes; float is proactive/optional, extension is reactive/mandatory.
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