Free calculator
Lock vs. wait rate calculator
Locking a commercial loan rate today has a known interest cost. Waiting has an expected one: the interest at the rate you expect to get later, plus what the short-term carry costs over today’s rate in the meantime, weighted by the probability you put on each outcome. The cheaper of the two is the arithmetic answer.
What does waiting cost on a sample loan?
| Input | Value |
|---|---|
| Loan amount | $5,000,000 |
| Loan term | 60 months |
| Rate you can lock today | 7.50% |
| Carry rate while waiting | 11.00% |
| Rate if you lock in one month | 7.30% |
| Chance you lock in one month | 45.00% |
| Rate if you lock in two months | 7.10% |
| Chance you lock in two months | 30.00% |
| Rate if you lock in three months | 7.90% |
| Chance you lock in three months | 25.00% |
Expected saving from waiting$1,250
- Lock now: $5,000,000 × 7.50% over five years = $1,875,000 of interest.
- Each month spent waiting costs the carry premium over the lock rate: $5,000,000 × (11.00% − 7.50%) ÷ 12 = $14,583.
- One-month wait at 7.30%: $1,825,000 of interest plus $14,583 = $1,839,583.
- Two-month wait at 7.10%: $1,775,000 plus $29,167 = $1,804,167.
- Three-month wait, with rates up to 7.90%: $1,975,000 plus $43,750 = $2,018,750.
- Weighted 45%, 30% and 25%, the expected cost of waiting is $1,873,750.
- Against $1,875,000 to lock today, waiting is expected to save $1,250.
A $1,250 edge on a $5,000,000 loan is about 0.03% of the balance: the two falling-rate outcomes save $35,417 and $70,833, and the one where rates rise costs $143,750. On odds like these the decision turns on whether you can carry the property for another quarter, not on the rate view.
How do you compare locking with waiting?
Interest = Loan × Expected rate × Term in years Waiting premium = Loan × (Carry rate − Lock rate) × (Months waited ÷ 12) Scenario cost = Interest + Waiting premium Expected cost of waiting = Σ (Scenario cost × Probability) ÷ Σ Probability
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How do you read the result?
The output compares your own assumptions; the calculator has no view on rates. If you would not put a probability on a rate move, locking removes a risk you have declined to price.
Weigh the size of the gap more than its direction. The model leaves out the cost of a rate cap or lock extension, any change in the lender’s spread and the risk that the quote is withdrawn. Each of those favors locking, so a narrow edge for waiting sits inside what the model cannot see.
Frequently asked questions
Why include a carry cost at all?
A borrower who delays a refinance or a purchase usually pays a higher short-term rate in the meantime. Only the premium over today’s lock rate counts, because a borrower who locks pays the lock rate over those same months, and a longer wait needs a bigger rate improvement to pay for itself.
Where do the probabilities come from?
From you. Enter them so they sum to one hundred and the weighted figure reads as a straight expectation.
Does the comparison use an amortizing payment?
No. It charges interest on the full balance for the whole term, as on an interest-only loan. On an amortizing loan the balance falls, so every figure here, the saving included, runs somewhat larger than the real one.
What if I can only wait one month?
Set the other two probabilities to zero, and the comparison runs straight against locking today.
What does YieldStack do?
YieldStack is a commercial mortgage brokerage. Every term sheet comes from a lender in the network and is subject to that lender's underwriting.
Does it cost anything to see terms?
No. It costs Zero upfront to submit a deal and review offers; YieldStack's broker fee is 0.50–1.00% of the loan amount and is paid only at closing.
Is financing guaranteed?
No. Every credit decision is made by the lender; YieldStack arranges the introductions and negotiates on the borrower's side, and no loan, rate, or closing is guaranteed.
Where does YieldStack operate?
Nationwide. YieldStack arranges commercial real estate financing nationwide. Every deal is business-purpose commercial financing, and the broker fee is paid only at closing.
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YieldStack is a commercial mortgage brokerage.