Extended Rate Lock New Construction 2026: Options, Costs, and Float-Down Provisions

Rate lock management on new construction is operationally different from standard purchase locks. A home that is 5 months from completion cannot be locked with a 45-day lock at application. The MLO must choose between floating to completion, paying for an extended lock, or using a one-time close product. Each approach has real cost implications for the borrower.

Extended Lock Pricing

Most lenders price extended locks in increments beyond the standard 30-to-60-day period. Typical pricing is 0.125% to 0.25% of the loan amount per month of additional lock time. A borrower locking a $500,000 loan for 9 months instead of 60 days might pay 0.875% to 1.75% in additional lock premium, or $4,375 to $8,750. This cost can be absorbed by the builder as an incentive, paid by the borrower as additional points, or structured as a slightly higher rate.

Float-Down Provisions

Some extended lock products include a one-time float-down option that allows the borrower to lower the locked rate if market rates drop by a defined threshold. Common triggers require rates to fall by at least 0.25% to 0.50% below the locked rate. The float-down is typically only available once and must be exercised within a specified window before closing. Read the float-down terms precisely before presenting this as a feature to borrowers.

Lock Extension Fees When Construction Is Delayed

When the builder misses a completion date and the rate lock expires, extension fees apply. Extension fees are typically 0.125% to 0.25% per 30-day extension period. The question of who pays the extension fee should be addressed in the purchase contract or builder incentive agreement before the lock is placed. Builders who cause the delay should cover extension costs, but this only holds if it is in writing.