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Rate Protection


Definition of "Rate Protection"

Mark Morlock
  Keller Williams Realty

Protection for a borrower against the danger that rates will rise between the
time the borrower applies for a loan and the time the loan closes. Rate protection can take the form
of a lock, where the rate and points are frozen at their initial levels until the loan closes, or a
float-down, where the rates and points cannot rise from their initial levels but they can decline if
market rates decline. In either case, the protection only runs for a specified period. If the loan is
not closed within that period, the protection expires and the borrower will have to either accept the
terms quoted by the lender on new loans at that time or start the shopping process anew.



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