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What does it mean to have a floating rate and what does it mean to lock-in a rate?

These terms are used to describe interest rate protection plans for borrowers who have not yet closed on a property. Many lenders offer this type of rate protection for borrowers. Due to market fluctuations, interest rates are subject to change daily. In order to obtain a specific rate/point combination you must "lock in" your rate with your lender. You are locked into that rate as long as your loan closes by the predetermined expiration date. Your monthly mortgage payments will be calculated based on your locked in interest rate. If the lender offers a floating rate and interest rates decrease, the lender may allow you to "float" your interest rate down to the new lower level.

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