float down

Guest 0.10 Dollars($)

got a float down rate lock and rates are now gone down after the lock. But my broker says that he can't float down until the week of the close, and only if the rate is more than 1/4% lower.

Guest 0.10 Dollars($)

Hi,

As per my knowledge, there is no standard float-down contract and each lender develops his own.

jameshogg · Posted: Wed May 31, 2006 11:36 am Post subject:

Hi Opwuo,

A float-down is a rate lock, plus an option to reduce the rate if market rates decline. Since it carries more value to the borrower than a lock and is more costly to the lender to provide, the borrower pays a higher price for it.

Not all float-downs are created equal and you should clarify all the necessary points with your broker.

James

blue · Posted: Wed May 31, 2006 12:10 pm Post subject:

Hi,

I would like to add few more points to what James has said which should always be asked to a broker or lender like:

When can I exercise the option?

How often can I exercise?

Is there any minimum price reduction for exercise?

How is the current market price communicated to me?

Hope this information will be helpful.

Blue

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