Best mortgage and refinancing rates of the day: Tuesday, January 12, 2021
Refinancing rates have increased since last Tuesday, as have adjustable rates on original mortgages. Fixed rates are down one or two basis points.
Even with slight increases, mortgage rates are generally at historically low levels. It might be a good day to set a rate. You might want to go with a fixed rate mortgage rather than an ARM, however.
Darrin English, Senior Community Development Loan Officer at Quontic Bank, 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 might be good options if you were planning on moving before your rate went up. However, fixed rates are currently lower than ARM rates. If your finances are strong, this could be a good day to lock in a low rate.
Rates of the Federal Reserve Bank of Saint-Louis.
Mortgage rates haven’t changed much since last Tuesday – 30-year fixed rates are down two basis points, 15-year fixed rates are down one basis point, and adjustable rates 5/1 are up four basis points. Mortgage rates have generally fallen since the same period last month.
In general, mortgage rates are at their all-time low. 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 are usually a sign of a struggling economy. Mortgage rates will likely remain low as the United States continues to fight the COVID-19 pandemic.
Prices from The bank rate.
Refinancing rates have been rising since last Tuesday. The 30-year refinance rates have increased by four basis points since the same period last month, while the 15-year and 10-year refinance rates have declined slightly.
A 30 year fixed rate mortgage Lock in your rate for the life of your loan and you’ll pay off the mortgage over 30 years.
You will pay a higher interest rate on a 30 year fixed mortgage than on a 15 or 10 year fixed rate mortgage. For a long time, you would also pay a higher rate on a 30-year fixed loan than on a 5/1 ARM. But for now, 30-year fixed rates are the best deal.
Monthly payments are lower for 30-year terms than for shorter terms because you are spreading the payments over a longer period.
You will pay more long term interest with a 30 year term than you would with a shorter term because a) the rate is higher and b) you will pay interest for longer.
With a Fixed term of 15 years, you’ll pay off your mortgage over 15 years and your rate will stay the same all the time.
You will pay more each month on a 15-year mortgage than on a 30-year mortgage because you are paying off the same principal of the loan in a shorter period of time.
But you can save a lot of money on interest with a 15-year mortgage. 15-year fixed rates are lower than 30-year rates, and you’ll pay off the mortgage (and interest) in half the time.
Some lenders offer 10-year terms on the original mortgages. However, you are more likely to refinance over a 10-year term.
10-year fixed mortgage rates are comparable to 15-year rates, but you’ll pay off your loan five years sooner.
With a variable rate loan, your rate stays the same for the first few years and then changes periodically. Your tariff is blocked for the first five years on a 5/1 ARM, then your rate increases or decreases once a year.
ARM rates are at all time lows right now, but a fixed rate mortgage is still the best deal. 30-year fixed rates are comparable or lower than ARM rates. It might be in your best interest to lock in a low rate with a 30- or 15-year fixed rate mortgage rather than risk raising your rate later with an ARM.
If you are considering an ARM, you should still ask your lender what your individual rates would be if you chose a fixed or variable rate mortgage.
It might be a good day to apply for a mortgage if your finances are good. However, you don’t necessarily have to rush. Prices will likely stay low for months or even years. To get the best rate possible, consider taking some of the following steps before submitting a request:
- Increase your credit score paying off high-interest debt and making payments on time. A score of at least 700 will help – but the higher the better.
- Save more for a down payment. You don’t necessarily need a 20% deposit to get a good rate, but the more you save, the better your rate will be. If you don’t have a lot for a down payment right now, it might be worth saving for a few more months, as rates are likely to stay low. If you don’t have money for a down payment, you can apply for a USDA or VA loan, if you qualify.
- Lower your debt ratio. Your debt ratio is the amount you pay for your debt each month divided by your gross monthly income. Lenders want to see a debt-to-income ratio of 36% or less. Consider paying off certain debts, such as credit cards or a car loan, to get a lower ratio.
If you have a strong financial profile, this might be a good day to lock in a mortgage rate. But if not, you probably have time to improve your finances.
Laura Grace Tarpley is associate editor of banking and mortgage services at Personal Finance Insider, which covers mortgages, refinancing, bank accounts and bank reviews.