Mortgage Rate Lock Float Down

  

Categories: Mortgage

See: Mortgage. See: Mortgage Rate Lock.

Locking in a low interest rate on a mortgage is awesome, no doubt about it. But what happens if interest rates fall even further during our lock period?

Well, if we’ve got a “mortgage rate lock float down” going on, our interest rate can be adjusted downward to match the current going rate. The best part about this option is that it only works in one direction. If rates go up, for example, we’re still locked in with our nice low rate. The not-as-great part is that we usually have to pay a fee to initiate the downward float, and sometimes those fees can be steep. But if the interest rate drop is substantial enough, we’ll more than likely make up the cost of the fee with our reduced mortgage payments.

Related or Semi-related Video

Finance: What is a Mortgage?345 Views

00:00

Finance allah shmoop shmoop What is a mortgage Well people

00:07

a mortgage is just dead it's alone but one with

00:10

special tax treatment For most people simply put Any interest

00:15

you pay on a mortgage to buy a home is

00:18

tax deductible Morty morton's inputs down a hundred thousand bucks

00:25

to buy a home that costs four hundred big ones

00:29

his mortgages three hundred grand at five percent interest per

00:33

year So that's fifteen thousand dollars a year he pays

00:36

to rent the money from the bank which he uses

00:39

to buy his dream home with the loop de loop

00:42

waterslide Morty earns one hundred grand a year and pays

00:44

tax on his last fifteen thousand of earnings soas faras

00:48

The irs is concerned since morty can deduct his fifteen

00:52

thousand dollars in interest against his earnings he does not

00:56

in fact earn taxable wages of one hundred grand annually

01:00

Instead he earns taxable wages of eighty five thousand dollars

01:05

a year Essentially with government is doing is sharing in

01:08

some of the cost of renting the money Taub i'm

01:11

ortiz home well why would the u s government be

01:13

so charitable Well because home ownership has been integral part

01:17

of the american dream since the u s of a

01:20

i po'ed in seventeen seventy six easy access to mortgages

01:25

and then home buying can be a hugely beneficial asset

01:29

In the vast majority of cases homes create family stability

01:32

a store of wealth and tax dollars for local schools

01:36

in the form of real estate taxes So don't feel

01:39

bad about splurging on that water slide there Morty Just 00:01:42.93 --> [endTime] remember you're doing it for the kids Hello

Up Next

Finance: What is Adjustable-Rate Mortgage (ARM)?
17 Views

What is an Adjustable-Rate Mortgage (ARM)? An adjustable-rate mortgage is a mortgage that has a changing interest rate. Whatever it changes to is b...

Finance: What is Interest Only Mortgage?
17 Views

An interest-only mortgage is a mortgage on which you only pay the rent on money borrowed, rather than on the principal.

Finance: What is a second mortgage?
4 Views

What's a second mortgage? Easy: it comes after a first mortgage. Hit play for more details.

Finance: What is a Reverse Mortgage?
6 Views

With a reverse mortgage, payments go in the opposite direction of a normal mortgage, where you pledge your home as an asset, and receive $ each month.

Find other enlightening terms in Shmoop Finance Genius Bar(f)