What does it mean to Float in mortgage terms?

In mortgage terms, floating refers to the strategy of not locking in an interest rate immediately and instead choosing to wait, with the hope that interest rates will drop before committing to a rate. When a borrower floats a rate, they are taking on some risk, as rates can either increase or decrease. If rates do fall, the borrower can lock in at the lower rate, which can result in significant savings over the life of the loan. However, if rates rise, the borrower may end up with a higher rate than if they had locked in earlier.

This approach requires careful monitoring of market conditions, as interest rates fluctuate based on various economic factors. Borrowers who float their rates should be prepared for the possibility of having to proceed with a higher rate if they decide to lock in too late, making it a strategic decision in the financing process.