However, when locking in your rate, borrowers must decide between floating and locking the rate.
Floating is the process of leaving your mortgage rate unlocked and waiting to see if it will drop anytime soon. On the other hand, locking in your rate means that your loan rate will be fixed for the duration of the loan. Both have their advantages and disadvantages and the decision depends on the borrower's individual financial situation.
Many borrowers choose to float their mortgage rate due to the possibility of rates dropping lower than their locked-in rate. Floating allows them to take advantage of the lower rates if they happen. However, floating also carries the risk of rates increasing, which could cause your monthly payments to also increase.
Locking in your rate can provide borrowers with the peace of mind knowing that their monthly payments will remain fixed throughout the life of their loan. This makes budgeting easier since you know exactly how much you'll be paying each month. It also reduces the risk of paying a higher interest rate at the end of the loan period.
The best advice for borrowers trying to decide between floating and locking their mortgage rate is to look at your current financial situation and decide if you can handle the risks associated with floating or if it would be better to lock in your rate right away. If you're worried about the possibility of rates increasing, locking in may be the best option. However, if you're comfortable taking the risk of rates dropping and don't mind potentially paying a higher rate, then floating may be the right choice for you.
In conclusion, mortgage rates are staying low and lenders are becoming more competitive, making now a great time to purchase a home or refinance an existing mortgage. When deciding whether to float or lock in your rate, borrowers should carefully weigh the risks and rewards associated with both options and determine which one is best for their individual financial situation.
This article was contributed on Jul 17, 2023
