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Mortgage rates have shifted by one or two basis points since last Sunday, but remain low overall. Refinance rates have decreased since this time last week.

Mortgage and refinance rates are both at all-time lows right now, and you’ll probably get a better deal with a fixed-rate mortgage than an adjustable-rate mortgage.

Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that adjustable-rate mortgages are less beneficial for borrowers than they used to be. ARM rates are starting higher than fixed-rate mortgages, and you’d risk your rate increasing later. It’s probably better to lock in a historically low interest rate now with a fixed-rate mortgage.

If your finances are in a good place, it could be a good time to get a fixed-rate mortgage or refinance.

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 2.71% 2.72% 2.78%
15-year fixed 2.26% 2.28% 2.32%
5/1 ARM 2.86% 2.85% 2.89%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates have shifted only slightly since last Sunday — the 30-year fixed rates are down by one basis point, 15-year fixed rates are down by two basis points, and 5/1 adjustable rates are up by one basis point. Rates have decreased across the board since this time last month.

Mortgage rates are at all-time lows overall. The trend downward becomes more obvious when you look at rates from 6 months and a year ago:

Mortgage type Average rate today Average rate 6 months ago Average rate 1 year ago
30-year fixed 2.71% 3.18% 3.68%
15-year fixed 2.26% 2.62% 3.14%
5/1 ARM 2.86% 3.10% 3.39%

Rates from the Federal Reserve Bank of St. Louis.

Several factors affect mortgage rates. Lower rates tend to be a sign of a struggling economy. As the coronavirus pandemic and economic crisis continue, rates will likely stay relatively low.

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 2.99% 3.04% 3.07%
15-year fixed 2.44% 2.66% 2.72%
10-year fixed 2.50% 2.59% 2.58%

Rates from Bankrate.

Refinance rates have decreased overall since this time last week, and they’re down since last month.

These rates were last updated on Friday, December 4.

A 30-year fixed-rate mortgage charges a higher interest rate than a 15-year or 10-year fixed-rate mortgages. For a long time, you’d 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 better deal.

You’ll pay more in interest in the long term with a 30-year term than you would for a 15-year or 10-year term, because a) the rate is higher, and b) you’ll be paying interest for longer.

The good news is that you’ll pay less each month on a 30-year term than on a shorter term, so you’re spreading your payments out over a longer period of time.

You’ll pay less on a 15-year fixed-rate mortgage than on a 30-year mortgage over the years, for two reasons: The 15-year mortgage charges a lower interest rate, and you’ll pay off your mortgage in half the time.

Your monthly payments will be higher on a 15-year mortgage, though. You’re paying off the same amount of money in a shorter amount of time, so you’ll pay more each month.

The 10-year rates are similar to 15-year rates, but you’ll pay off your mortgage five years sooner.

A 10-year term isn’t super common for an initial mortgage, but you may refinance into a 10-year mortgage.

With an adjustable-rate mortgage, or ARM, the lender locks in your rate for the first few years. Then your rate will change periodically. A 5/1 ARM keeps your rate the same for the first five years, then your rate will fluctuate once per year.

ARM rates are low overall right now, but fixed-rate mortgages are still the better deal. Fixed rates are lower than ARM rates, so you may want to lock in a low rate with fixed-rate mortgage instead of risking a rate increase later with an ARM.

If you’re considering an ARM, you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus an ARM.

Fixed-rate mortgages are good deals overall right now, regardless of whether you’re getting an initial or refinanced mortgage. English doesn’t recommend applying for an adjustable-rate mortgage, though.

“I can’t see one good reason why someone would choose to go with an ARM versus a 30-year fixed rate in today’s market,” English said. “Why take the risk when you can get a better rate in a 30-year loan?”

If your finances are in a good place, it could be a good time to lock in a low rate. But if your financial profile could use some work, you probably have time to make some improvements before applying for a mortgage. Rates will likely stay low well into 2021, so consider taking some of the following steps to land a better rate:

  • Improve your credit score by making payments on time, paying down debt, and letting your credit age. Lenders typically reward higher credit scores with lower interest rates.
  • Save more for a down payment. You may be able to put down as little as 3% on a conventional mortgage. But the higher your down payment, the better your rate could be. Because rates should stay low for a while, you probably have time to save more.
  • Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders prefer a DTI ratio of 36% or less, but an even lower ratio can result in a better rate. To improve your ratio, pay down debts or look for opportunities to increase your income.

If you feel comfortable with your financial situation, now could be a good time to get a fixed-rate mortgage or refinance.

Source Google News