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 historically low levels.
If you want 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 chez Quontic BankHe told Business Insider that fixed rates are much more beneficial to borrowers than adjustable rates these days.
Adjustable rates were starting to be lower than fixed rates, so they could be good options if you plan to move before your rate goes up. However, the fixed fee is currently lower than the ARM fee. If your finances are strong, this could be a good day to lock in a low rate.
The rates of Federal Reserve Bank of Saint-Louis.
30-year fixed mortgage rates have only risen by one basis point since last weekend, and 5/1 fixed and adjustable 15-year rates have come down. Mortgage rates have fallen since the start of December.
Mortgage rates are currently at record highs. The downward trend becomes more evident when looking at rates from six months ago or last January.
The rates of Federal Reserve Bank of Saint-Louis.
Lower rates are often a sign of a struggling economy. As the US economy continues to struggle with the coronavirus pandemic, rates are expected to remain low.
Prices from Bank charges, last update Friday
Refinancing rates have moved slightly since last weekend and have been declining since the same period last month.
With a 30 year fixed mortgage, you will pay off your loan for 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 period because you are spreading the payments out over a longer period than you would with a shorter term.
Ultimately, you’ll pay more interest with a 30-year term than with a 15-year mortgage, because a) the rate is higher and b) you’ll pay interest longer.
With a 15-year fixed mortgage, you’ll 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 loans. You’ll pay a lower interest rate over 15 years 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 capital in less time, so you’ll pay more each month.
10-year fixed mortgage rates are similar to 15-year fixed rates, but you’ll pay off your mortgage five years sooner.
Some lenders offer 10-year terms for initial mortgages, but these are not very common. However, you can refinance within 10 years.
A variable rate mortgage keeps its rate the same for the first few years, then changes it periodically. An ARM 5/1 blocks your tariff for the first five years. Then your rate increases or decreases once a year for the remaining 25 years.
ARM rates are currently at historically low levels, but a fixed rate mortgage is still the best deal. The 30-year fixed rates are comparable or higher than the ARM rates. You may want to lock in a low rate with a 30 or 15 year fixed rate mortgage rather than 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 choose a fixed rate mortgage over a variable rate.
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 record levels.
But you probably don’t have to rush. Rates should be kept 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 of your payments on time. You can 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 the fees should stay low for a while, you probably have time to save more.
- Lower your debt to income ratio. Your DTI index is the amount you pay off in 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 reduce your ratio, pay off your debts or consider opportunities to increase your income.
If your finances are healthy, 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 an associate writer for banking and mortgage services at Personal Finance Insider, which covers mortgages, refinancing, bank accounts and bank reviews.
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