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Mortgage and refinance rates have fluctuated a little since last Tuesday, but rates are still low overall. These days, 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 typically there’s an advantage to an adjustable-rate mortgage, in which the rate fluctuates after an initial period. That advantage is usually a lower rate for the fixed period.

However, he points out that ARMs don’t currently follow that pattern. Fixed rates are currently better than adjustable rates, because lenders want to keep customers banking with them for as long as possible. Even though the 30-year fixed rate and 5/1 adjustable rate are about the same right now, you’d risk your 5/1 ARM rate increasing in five years, whereas you could lock in a low rate for decades with a 30-year term.

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.

Fixed mortgage rates are down since last Wednesday, and adjustable rates are up — but none of the shifts are significant. Rates have decreased 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 2.95% 3.01% 3.07%
15-year fixed 2.44% 2.44% 2.71%
10-year fixed 2.49% 2.50% 2.58%

Rates from Bankrate.

The 30-year refinance rates have decreased since last Wednesday, while 15-year and 10-year rates have stayed the same. Refinance rates are down since this time last month.

A 30-year fixed mortgage comes with a higher interest rate than a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but 30-year terms have become the better deal recently.

Your monthly payments on a 30-year term will be lower than on a shorter-term mortgage. You’re spreading payments out over a longer period of time, so you’ll pay less each month.

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

A 15-year fixed-rate mortgage is less expensive than a 30-year term in the long run. The 15-year rates are lower, and you’ll pay off the loan in half the amount of time.

However, your monthly payments will be higher on a 15-year term than a 30-year term. You’re paying off the same loan principal in half the time, so you’ll pay more every 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, your rate stays the same for the first few years, then changes periodically. With a 5/1 ARM, your rate is locked in for the first five years, then your rate increases or decreases once per year.

ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. It could be in your best interest to lock in a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing 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.

Whether you want to get an initial mortgage or refinance, it could be a good time to get a fixed-rate mortgage. Fixed rates are at all-time lows right now. 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?”

You don’t necessarily need to rush to apply for a new 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:

  • Boost your credit score by making payments on time, paying down debt, and letting your credit age. A score of at least 700 will help you out — but the higher your score, the better your interest rate.
  • Save more for a down payment. With a conventional loan, you may be able to put down as little as 3%. But lenders usually reward a higher down payment with a lower interest rate. Because rates should 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 toward debts 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 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.

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