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Both mortgage rates and refinance rates have mostly decreased since last Tuesday, and since this time last month. Rates are at all-time lows, 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 advantageous for borrowers than they used to be. ARM rates are starting higher than fixed-rate mortgages, and you’d risk your rate increasing down the road. It’s probably better to lock in a historically low interest rate now with a fixed-rate loan.

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

The best mortgage rates Tuesday, November 24, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 2.72% 2.84% 2.80%
15-year fixed 2.28% 2.34% 2.33%
5/1 ARM 2.85% 3.11% 2.87%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates have decreased since last Tuesday, and since this time last month.

Mortgage rates are at historic lows overall. The gradual decrease becomes more apparent 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 2.72% 3.24% 3.66%
15-year fixed 2.28% 2.70% 3.15%
5/1 ARM 2.85% 3.17% 3.39%

Rates from the Federal Reserve Bank of St. Louis.

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

The best refinance rates Tuesday, November 24, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 3.04% 3.09% 3.19%
15-year fixed 2.66% 2.56% 2.63%
10-year fixed 2.59% 2.57% 2.59%

Rates from Bankrate.

Refinance rates for 30-year and 10-year mortgage refinances have gone down since last week and since this time last month, while the rate for 15-year loans has risen. In recent weeks, 30-year refinance rates have decreased the most significantly.

30-year fixed rates

A 30-year fixed mortgage charges a higher rate than a fixed-rate mortgage with a shorter term. For a long time, 30-year fixed rates were also higher than adjustable rates, but 30-year fixed mortgages are actually the better deal right now.

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

You’ll make higher monthly payments on a 30-year term than on a shorter term, because you’re spreading out payments over a longer period of time.

15-year fixed rates

You’ll pay a lower rate on a 15-year mortgage than on a 30-year mortgage. Between the lower rates and paying off the loan in a shorter amount of time, you’ll pay less on a 15-year mortgage over the years.

Your monthly payments will be higher on a 15-year mortgage than on a 30-year mortgage, though. You’re paying off the same principal amount in half the time, so you’ll pay more each month.

10-year fixed rates

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

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

5/1 adjustable rates

An adjustable-rate mortgage, often referred to as an ARM, keeps your rate the same for the first few years, then changes it periodically. A 5/1 ARM locks in your rate for the first five years, then your rate will fluctuate once per year.

Although ARM rates are relatively low these days, you still may want to go with a fixed-rate mortgage. The 30-year fixed rates are comparable to or lower than ARM rates, so it could be good to lock in a low rate with a fixed mortgage rather than risk your rate going up 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 adjustable-rate mortgage.

Is it a good day to get a mortgage or refinance?

Refinance rates are at historic lows, so you may want to consider refinancing in the next couple weeks. Starting December 1, most borrowers will pay a 0.5% fee for refinancing. If you lock in a rate before December 1, you don’t have to pay the new fee.

But if your finances could use some work, it could still be in your best interest to wait to refinance. A poor credit score or a high debt-to-income ratio will result in a higher interest rate, which could cost you more than the 0.5% closing fee in the long run.

Whether you want to refinance or get an original mortgage, a fixed-rate mortgage is probably the best deal. Fixed rates are at all-time lows right now. English doesn’t recommend applying for an ARM, 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?”

You don’t necessarily need to rush to apply for a new mortgage, though. Mortgage rates will likely stay low well into 2021, if not longer. If you want to land the best rate possible, consider taking some of the following steps before submitting an application:

  • Increase your credit score. A score of at least 700 will help you out — but the higher your score, the better your interest rate. The most important factor in boosting your credit score is making all your payments on time. You can also pay down debts aggressively or let your credit age.
  • Save more for a down payment. You may be able to place as little as 3% down on a conventional mortgage. But lenders reward larger down payments with lower interest rates, so you may want to save more than the minimum requirement. Because rates should stay low for a while, you probably have time to save more for a down payment.
  • Lower your debt-to-income ratio. Your DTI is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI of 36% or less, but a lower ratio can result in a lower rate. To improve your ratio, look for chances to increase your income or pay down debts.

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