What Happens if Mortgage Rates Drop After You're Approved? (2024)

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Whether you’re buying a new home, refinancing your current mortgage, or have an upcoming mortgage renewal, your ultimate objective remains the same: securing the lowest possible mortgage rate.

Locking in a rate is important as it protects you against rising rates. Once your application has been submitted to the lender for approval, that rate is now set. Even if rates increase one minute later, you were able to slide in under the wire and secure the lower rate ahead of the increase.

That’s great if rates are rising, but what happens if mortgage rates drop after you have been approved and signed the mortgage commitment?

Rate Float Downs and How They Work

Most lenders have a rate float down policy, which will allow us to get the rate lowered for you should rates drop after approval. It does not matter whether you have signed the mortgage commitment or not.

While some lenders will allow for unlimited rate float downs, others will limit you to just one. This is where we need to be strategic. We won’t necessarily jump at implementing your rate drop unless we’re either close to your closing date or if it looks like rates are going to rise.

Sometimes rates can increase without notice, but this is something that we will monitor for you. If it looks like we’re in danger of losing the rate, then we’ll proceed with the float down request.

But if there is time before your closing and if it looks like rates will fall further, we’ll hold off to make sure we’re putting in the request at the right time to ensure you receive the maximum possible savings from your mortgage.

The ‘New Business Only’ Clause

Sometimes there are promotional rates that are for new business only, which means the lender has a ‘no rate float down policy’ on this particular product. In other words, it’s for new applications only. As the lender already has your application, it’s no longer considered new business. If the rate drops after your approved, then you’re would not be eligible for the lower rate. That doesn’t mean that you’re out of options. We may be able to find another lender with a similar rate that we can move you to. Even if you’ve already signed.

One advantage to dealing with the Paul Meredith Team is that we do a large volume, so mortgage lenders will do whatever they can to keep us happy. And the best way to keep us happy is by helping us to keep you happy. And keeping you happy is our number one priority!

Leveraging our relationships with our lenders, we can press them to reduce the rate for you. While they will generally cooperate with us, there is no guarantee. Should they refuse to lower your rate, then we can always move you to another lender with a similar rate, providing there is enough time to start the process from scratch with another lender.

A Lower Rate Doesn’t Always Mean it’s the Best Choice

It’s great to get the lowest rate out there. But the lowest rate doesn’t always mean it’s the best option for you. There are times when mortgages can have terms and conditions that could come back to bite you down the road. It could be a mortgage with harsher penalties, or there could be other restrictions that may make choosing the option not worth the savings you would see from the lower rate. I explain this in detail in my blog on The Best Mortgage Rate Vs. The Best Mortgage

Conclusion

Getting the lowest rate on the market is a great feeling, and it’s a feeling that our clients get to experience with us daily! It’s something we’re very serious about. We monitor rates for our clients right up until closing. If the rate drops, we’ll request to have your rate dropped. This can be done right up until about a week before your closing. Sometimes we can get it even tighter than this, depending on the lender.

There is the lowest rate at time of approval and then there is the lowest rate at closing. It’s the one at closing that is most important. In fact, it’s the only one that matters!

At the Paul Meredith Team, we’re not just going get you the lowest rate, we’ll explain anything unique about the mortgage option being presented. If there is a hidden clause or restriction, we’ll let you know about it when quoting you the rate.

Helping you save as much money as possible goes far beyond the rate. Our expert guidance and professional advice can save you even more, well after your mortgage closes. Not just from the advice we provide, but from the guidance on your choice of rate product and overall structure of the mortgage. It’s all part of our commitment to giving you a better mortgage experience than you’ll get anywhere else!

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