Some mortgage and refinance rates have gone down since last Saturday, while others have gone up, but the changes are not very significant. Rates are still at their all-time low.
If you are looking to buy a home or refinance, you may prefer a fixed rate mortgage over an adjustable rate mortgage.
Darrin English, Senior Community Development Loan Officer at Quontic BankHe told Business Insider that fixed rates are much better for borrowers than adjustable rates these days.
Adjustable rates were starting to get lower than fixed rates, so they could be good options if you were planning to move before your rate went up. However, the fixed fees are currently lower than the ARM fees. If your finances are strong, this might be a good day to lock in a low rate.
Rates of Bank of the Federal Reserve of Saint-Louis.
Fixed 30-year mortgage rates have only risen one basis point since last weekend, and 15-year fixed and adjustable 5/1 rates have declined. Mortgage rates have been falling since early December.
Mortgage rates are currently at historically low levels. The downtrend becomes more apparent when you look at rates from six months ago or last January.
Rates of Bank of the Federal Reserve of Saint-Louis.
Lower rates are often a sign of a struggling economy. As the US economy continues to fight the coronavirus pandemic, rates are expected to remain low.
Prices from The bank rate, last update on Friday
The refinance rates have changed slightly since last weekend and have fallen since last month.
With a 30-year fixed mortgage, you will pay off your loan in 30 years and your rate will stay the same all the time.
You will pay a higher interest rate on a 30-year fixed mortgage than on a short-term fixed-rate mortgage. 30-year fixed rates were previously higher than adjustable rates, but recently 30-year terms have been the better option.
The monthly payments are relatively low for a 30-year term because you are spreading the payments over a longer period than you would with a shorter term.
In the end, you will pay more interest with a 30-year term than with a 15-year mortgage because a) the rate is higher and b) you will pay interest longer.
With a 15-year fixed mortgage, you pay off your loan for 15 years and pay the same rate for the life of the loan.
15-year fixed-rate mortgages are more affordable than 30-year long-term terms. You’ll pay a lower interest rate over a 15-year term and pay off the mortgage in half the time.
However, your monthly payments will be higher for a 15-year mortgage than for a 30-year mortgage. You pay the same principal in a shorter period of time, so you will pay more each month.
The 10-year fixed mortgage rates are similar to the 15-year fixed rates, but you will pay your mortgage five years earlier.
Some lenders offer 10-year terms for initial mortgages, but these are not very common. However, you can refinance within 10 years.
An adjustable rate mortgage keeps its rate the same for the first few years and then changes it periodically. A 5/1 ARM locks in your rate for the first five years. Then your rate increases or decreases once a year for the remaining 25 years.
ARM rates are currently at record lows, but a fixed rate mortgage is still the best deal. 30-year fixed rates are comparable to or higher than ARM rates. You may want to lock in a low rate with a 30- or 15-year fixed rate mortgage instead of risking your rate going up later with an ARM.
If you are considering an ARM, you should always ask your lender what your individual rates would be if you chose a fixed or adjustable rate mortgage.
Whether you want to get an initial mortgage or a refinance, this could be a good day to get a fixed rate mortgage. Fixed rates are currently at historically low levels.
But you probably don’t have to rush. Rates are expected to stay low until 2021, so you have time to strengthen your financial portfolio and get a better rate. Here are some ways to get a better mortgage rate:
- Increase your credit score. Make sure you make all your payments on time. You may also consider paying off more debt or aging your credit. You may want to request a copy of your credit report to review your report for errors that may affect your score.
- Save more for your down payment. Depending on the type of mortgage you want, you may need 0% to 20% for the down payment. But lenders offer lower rates to people with higher down payments. Since fees are expected to stay low for a while, you likely have time to save more.
- Reduce your debt-to-income ratio. Your DTI ratio is the amount you pay on debt each month divided by your gross monthly income. Many lenders want to see a DTI ratio of 36% or less, but the lower your ratio, the better your rate. To lower your ratio, pay off your debts or consider opportunities to increase your income.
If your finances are good, you could get a low mortgage rate now. But if not, you have plenty of time to make improvements and get a better rate.
Laura Grace Tarpley is Associate Editor for Banking and Mortgage Services at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews.
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