Mortgage Blog

From 2010, I told my clients that once the
rate locked, we will not float down the rates
any more.

But I need to explain this policy to you guys
one more time.

This floating down policy was not designed
to benefits the borrowers so that the borrowers
can get lower rates when the rate is lower.
It was designed to benefit/protect the lenders.

First, it was designed to protect lender's pipeline.
If for some reason, the interest rate went down
0.375% or more, the lender knows that some
borrowers will change the lenders for the better rates,
so in order to protect their pipeline, they willl
allow the loans in the pipeline to be floated" down.
But the borrowers or the agents will have to
pay the average of 0.625 points to get the lower rates.

This 0.625 points are equivalent of 0.25% rates. So
if the interest is 0.375% lower, you can get 0.125%
rate lower; if the interest rates 0.5% lower, you
can get 0.25% lower.

Some borrowers did ask: Can we expire the current
rate and re-lock the current market rate? The answer
is no. The lender will only allow float down the rate
(pay 0.625 points first) or take the worse case scenario
(if the market rate is better than your old rate,
you will get the old rate; if the market rate is higher,
you will get the higher market rate). And if you
let the current rate expire, and want to lock the new rate,
the lender will only allow you to lock a new rate
90 days after the old rate expires.

That's why I always recommend to close the loan first once
the rate locked. It's your commitment, though you can change.

And like I told in the previous blogs, those who cancelled
my loans before, they found that they did not get the best
rates. And no one know the best rate until the market
confirms so.