Some mortgage rates have fallen since last Sunday, while others have increased. Refinancing rates are generally on the rise. However, none of the changes are very significant.
Mortgage and refinance rates are generally low, so now might be a good time to get a new mortgage if your finances are good. You will probably get the best deal on a fixed rate mortgage, not a variable rate mortgage.
Variable rate mortgages change your rate after an initial period. Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that these mortgages were working in favor of some borrowers as adjustable rates would start to be lower than fixed rates.
Mr. English said variable rate mortgages were becoming less beneficial for borrowers. ARM rates start higher than fixed rate mortgages, and you risk increasing your rate later. It is safer to lock in a low rate now rather than facing higher rates later.
If your finances are stable, this might be a good time to get a fixed rate mortgage or refinance.
Rates of the Federal Reserve Bank of Saint-Louis.
Fixed mortgage rates have fallen since last Sunday and adjustable rates have increased. Mortgage rates have fallen since that time last month.
In general, mortgage rates are at historically low levels. The downward trend becomes more evident when you look at the rates from six months and a year ago.
Rates of the Federal Reserve Bank of Saint-Louis.
Low rates usually signal a struggling economy. Mortgage rates will likely stay low as the United States continues to grapple with the coronavirus pandemic.
Prices from The bank rate.
Refinancing rates have risen slightly since last weekend, but generally remain low. They have decreased since last month. These rates were last updated on Friday.
A 30-year fixed rate mortgage locks in your rate for the life of your loan, and you’ll pay off the mortgage over 30 years.
A 30 year fixed rate mortgage carries a higher interest rate than a 15 or 10 year fixed rate mortgage. For a long time, you would also pay a higher rate on a 30 year fixed mortgage than on a 5/1 ARM. But right now, 30-year fixed rates are the best deal.
You will pay more long term interest with a 30 year term than you would with a 15 or 10 year term because a) the rate is higher and b) you will pay interest for longer.
The good news is that you’ll pay less each month over a 30-year period than over a shorter period, so you’re spreading your payments out over a longer period.
With a fixed term of 15 years, you will pay off your mortgage over 15 years and your rate is locked in for the entire term.
A 15-year fixed-rate mortgage is less expensive than a 30-year long term. The 15-year rates are lower and you’ll pay off the loan in half the time.
However, your monthly payments will be higher over a 15-year term than over a 30-year term. You pay off the same loan principal in half the time, so you’ll pay more each month.
10-year fixed rates are generally similar to 15-year rates, but you will own your home five years earlier.
A 10-year term is not very common for an initial mortgage, but you can refinance a 10-year mortgage.
An adjustable rate mortgage, often called an ARM, keeps your rate the same for the first few years, then changes it periodically. An ARM 5/1 blocks your rate for the first five years, then your rate will fluctuate once a year.
Although ARM rates are relatively low these days, you may still want to go with a fixed rate mortgage. 30-year fixed rates are comparable or lower than ARM rates, so it might be good to lock in a low rate with a fixed mortgage rather than risking your rate rising 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 or adjustable rate mortgage.
Now might be a good time to get a mortgage, but don’t worry if you aren’t ready yet. Mortgage rates are expected to stay low for months (if not years), so you’ll likely have time to take advantage of low rates.
To get the lowest rate possible, consider working to improve your finances. Here are some tips for securing a low mortgage rate:
- Increase your credit score by making payments on time, paying off debt and aging your credit. A score of at least 700 will help – but the higher the better.
- Save more for a down payment. With a conventional mortgage, you may be able to deposit as little as 3%. But the higher your down payment, the lower your rate is likely to be. Because rates are expected to stay low for a while, you probably have time to save more.
- Lower your debt to income ratio. Your DTI is the amount you pay for debt each month divided by your gross monthly income. Most lenders want to see a DTI of 36% or less, but an even lower DTI can result in a better rate. To improve your DTI, pay off your debt or find out if you can make more money.
Laura Grace Tarpley is associate editor of banking and mortgage services at Personal Finance Insider, which covers mortgages, refinancing, bank accounts and bank reviews.
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