The Veridian Blog

Many clients and realtors ask me about dropping their rate after locking in – is this possible?

Traditionally, wholesale lenders officially prohibit dropping a rate after it has been locked.  Otherwise, everyone would lock as soon as possible only to re-lock if the rate subsequently dropped.  There would be no point to rate locking and lenders would find themselves on the short end of the stick. 

However, most lenders currently offer a re-lock and rate drop, or renegotiation for a fee – anywhere from 0.25% to 0.50% of the loan amount.  What this means is that rate drops are possible but only in a scenario where the general level of interest rates drop significantly enough to warrant (broker or borrower) the additional fee.  This situation seldom occurs in an average market environment because the significant drop has to happen in a short period of time – usually 30 days or less.  Also, it almost never makes sense for brokers to switch to another lender because we almost always choose the lender with the best rate to begin with. 

An alternative for borrowers is to let a current rate lock expire and wait 30 days before becoming eligible to re-lock at the then-current market price without an additional fee.  That would be a monumental gamble, however, as anything can happen in those 30 days.  This option is somewhat outdated because lenders soon realized that all their files disappeared when borrowers flocked to other lenders who didn’t impose such restrictions.  Hence, lenders created their own renegotiation policies.  For more detail, (a lot of this is easier to explain by phone) please ring us!