Today's best mortgage and refinance rates: Monday, September 14, 2020

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Fixed mortgage rates have been steadily decreasing, while adjustable rates have increased in recent weeks. Refinance rates have gone down across the board since this time last week and last month.

The best mortgage rates Monday, September 14, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.86%2.93%2.96%
15-year fixed2.37%2.42%2.46%
5/1 ARM3.11%2.93%2.90%

Rates from the Federal Reserve Bank of St. Louis.

The 30-year and 15-year mortgage rates have been gradually decreasing over the past few weeks. The 5/1 adjustable rates have been steadily increasing.

Mortgage rates are still low overall. You can see the trending decline when you look at rates from 6 months or a year ago:

Mortgage typeAverage rate todayAverage rate 6 months agoAverage rate 1 year ago
30-year fixed2.86%3.36%3.56%
15-year fixed2.37%2.77%3.09%
5/1 ARM3.11%3.01%3.36%

Rates from the Federal Reserve Bank of St. Louis.

The 5/1 ARM rates have been going up. But if you get a 5/1 ARM now, you'll likely snag a lower rate than you would have in 2019.

Several factors affect mortgage rates. Decreasing 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 Monday, September 14, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed3.09%3.11%3.41%
15-year fixed2.54%2.53%2.81%
10-year fixed2.61%2.60%2.88%

Rates from Bankrate.

The 30-year, 15-year, and 10-year fixed refinance rates have all fluctuated a little since last Monday. But refinance rates are down across the board since this time last month.

How 30-year fixed rates work

Typically, you'll pay a higher rate on a 30-year fixed-rate mortgage than on a 15-year fixed or 5/1 adjustable mortgage. But 5/1 ARM rates are higher than 30-year fixed rates right now, so getting a 30-year fixed rate is especially affordable.

Your monthly payments will be lower compared to the other types of loans, because your principal is spread out over a longer period of time.

The downside is that you'll pay more in interest than you would with a 15-year fixed term because a) the rate is higher, and b) your interest is also spread out over a longer period of time.

How 15-year fixed rates work

A 15-year fixed rate is lower than what you'll pay for a 30-year mortgage. Monthly payments will likely be higher, because you're paying off the principal in half the time.

You'll save money in the long run, though, because the rate is lower, and you'll be making payments for a shorter amount of time.

How 10-year fixed rates work

A 10-year fixed-rate mortgage isn't very common for an initial mortgage. But you might refinance into a 10-year mortgage after you've paid down some of your loan.

Rates are similar to what you'll pay for a 15-year fixed-rate mortgage, but you'll pay off your loan faster.

How 5/1 ARMs work

A 5/1 adjustable rate is typically lower than the 30-year fixed rate but higher than the 15-year fixed rate. But 5/1 ARM rates have been increasing, so it could be a better deal to get a fixed rate right now. 

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

With a 5/1 ARM, a low rate is locked in for the first five years. Then your rate changes once per year for the remaining 25 years.

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

You may want to consider applying for a mortgage or refinancing your home, because rates are at historic lows right now.

Think about refinancing soon if your finances are in a good place. Starting December 1, 2020, many borrowers will pay a fee of 0.05% for refinancing. Starting the process now could save you money. But if you have a low credit score or high debt-to-income ratio, it still might be better to wait. If your credit score is low or debt-to-income ratio is high, then you could end up paying significantly more in interest.

If you want to apply for a new mortgage, then you don't necessarily need to rush. Many economists believe rates will stay low into 2021. If you're trying to land the lowest rate, consider taking some of the following steps before submitting an application:

  • Increase your credit score by paying down high-interest debt and making payments on time. A score of at least 700 will help you out — but the higher, the better.
  • Save more for a down payment. You don't necessarily need a 20% down payment to get a good rate, but the more you save, the better your rate will likely be. If you don't have much for a down payment right now, then it could be worth saving for a few more months, since rates are likely to stay low. If you don't have money for a down payment, then you could apply for a USDA or VA loan, if you qualify.
  • Lower your debt-to-income ratio. Your debt-to-income ratio is the amount you pay toward debts each month, divided by your gross monthly income. Lenders want to see a debt-to-income ratio of 36% or less. Consider paying down some debts, such as credit cards or a car loan, to get a lower ratio.

If you feel comfortable with your financial situation, then now could be a good time to buy or refinance.

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