Down-only mortgage vs refinancing, ARMs and other options
Six ways a mortgage rate can come down, side by side. The down-only column describes Marian Mortgage as planned; Marian is pre-launch and not lending yet.
| Fixed-rate loan + refinancing | Adjustable-rate mortgage (ARM) | Rate-lock float-down | Lender rate-reduction option (some credit unions) | Automated refinance services | Down-only mortgage (Marian, planned) | |
|---|---|---|---|---|---|---|
| When the rate can fall | When you refinance into a new loan at a lower rate | At scheduled adjustments after the initial fixed period, if the index has fallen | Before closing, if market rates fall while your rate is locked | After closing, when you request a reduction and market rates have fallen enough under the lender’s program | When market rates fall far enough for the service to prepare a refinance, and you approve and close the new loan | After an initial fixed period, when market rates fall by a defined amount, under rules set in the loan terms. |
| Can it rise? | No, each loan’s rate is fixed | Yes, within its rate caps | No, the locked rate still applies | No | No, if each new loan is fixed-rate | No |
| Who does the work | You: notice the moment, apply and close a new loan | The lender adjusts the rate on schedule | You ask the lender to apply it | You request it from the lender | The service watches rates and prepares the refinance; you approve it and close a new loan | Marian does the work and the paperwork |
| Automatic? | No | Yes, on a schedule | Usually not; you request it | No, you request it | Partly; you approve each refinance | Yes |
| What triggers it | Your decision, and qualifying for the new loan | The adjustment date; the new rate is the index plus the margin | A drop in market rates set out in the lock terms | Your request, if you meet the program’s eligibility rules | Market rates falling enough for the service to flag a refinance, and qualifying for the new loan | Market rates falling by a defined amount set in the loan terms |
| Limits | Qualifying again, and earning back the closing costs | Caps on each adjustment and over the life of the loan; some ARMs have a floor | Only before closing, often only once, and only until the lock expires | Eligibility and fees vary by lender, and many programs cap how often you can use them | Qualifying again each time, and earning back each new loan’s closing costs | Resets stop at a floor. Any conditions on a reset (for example staying current on payments) are set in the loan terms, published at launch. |
| Where the cost shows up | Closing costs on each new loan; the refinance option is priced into every fixed rate | The borrower carries the risk of increases | Often a fee or a higher locked rate | Usually a fee each time you use it; terms vary by lender | Closing costs on each new loan, plus any fee the service charges | Built into the starting rate; any costs or conditions tied to a reset are in the loan terms, published at launch. |
| Cash out or change term? | Yes | Only by refinancing | No, it only changes the locked rate | No | Depends on the new loan | No; a rate drop never adds to what you owe or returns cash |
Where each one wins
- Refinancing can take cash out, change the loan term or switch loan type, and it can go below a down-only loan’s floor.
- An ARM usually starts at a lower rate than a fixed-rate loan, which can make it cheaper for someone who sells or refinances before the first adjustment.
- A float-down helps when rates fall between locking and closing, before the loan exists.
- A lender rate-reduction option can lower your rate without a full refinance, when your lender offers one and you qualify.
- A down-only loan’s feature buys nothing if rates never fall meaningfully during the loan.
How is this different from a float-down?
A float-down applies only before closing, often only once, and you ask the lender to apply it. After an initial fixed period, when market rates fall by a defined amount, Marian’s rate resets lower automatically, down to a floor.
How is this different from lender rate-drop programs?
Some lenders offer programs marketed as a “rate drop guarantee,” a “rate improver,” “free refi for life” or a “refinance fee credit.” These programs cover or waive some fees on a future refinance, or allow a one-time rate reduction, usually with conditions. Marian’s rate can reset lower automatically after the initial fixed period, down to a floor.
How to choose
If you’ll move or refinance within a few years, an ARM or a standard fixed-rate loan may cost less. If you expect to keep the loan for years and won’t reliably refinance at the right moments, automatic resets are worth comparing, judged by how much higher the starting rate is than a standard fixed-rate loan’s. Read what a down-only mortgage is and how Marian’s rate works. If rates have already fallen on a loan you have, see your options when rates drop after you buy. If you haven’t bought yet, see should you buy now or wait?