What's the difference between a rate lock and a 'lock + renegotiate' policy?

What's the difference between a rate lock and lock + renegotiate?

You want to understand how a rate lock differs from a 'lock + renegotiate' policy when securing your mortgage rate. Both protect you from rate increases, but they handle rate decreases differently.

A standard rate lock freezes your interest rate for a set period, typically 30 to 60 days. If rates drop after you lock, you keep the higher locked rate unless you start over with a new application. The lender honors the locked rate as long as you close within the timeframe and meet the loan terms.

A 'lock + renegotiate' policy (sometimes called a float-down option) lets you lock your rate but also capture lower rates if they drop before closing. The lender typically charges a fee for this flexibility, and specific rules govern when and how much you can renegotiate. Some policies require rates to drop by a minimum amount, like 0.25%, before you can adjust.

Check your loan paperwork for the exact terms of whichever option you choose. Ask your lender about fees, timeframes, and any conditions that apply to renegotiating. Each lender structures these policies differently, so understanding the specific rules helps you decide which approach works better for your timeline and budget.