Today's best mortgage and refinance rates: Saturday, January 9, 2021

Fixed mortgage rates have gone down since last Saturday, but adjustable rates and refinance rates have gone up. None of the shifts are super significant, though. Rates are down overall since this time last month.

If you're ready to get a mortgage or refinance, you may want to choose a fixed-rate mortgage over an adjustable-rate mortgage.

Mat Ishbia, CEO of United Wholesale Mortgage, told Business Insider there isn't much of a reason to choose an ARM over a fixed rate these days.

ARM rates used to start lower than fixed rates for the first few years, and there was a chance your rate could decrease later. But fixed rates are lower than adjustable rates right now, so you probably want to lock in a low rate while you can.

The best mortgage rates for Saturday, January 9, 2021

Rates from the Federal Reserve Bank of St. Louis.

The 30-year fixed mortgage rates have decreased by two basis points, 15-year fixed rates have decreased by one basis point, and 5/1 adjustable rates have increased by four basis points. Mortgage rates are down across the board since this time last month.

Mortgage rates are at record lows overall. The downward trend becomes more apparent when you look at rates from six months and a year ago.

Rates from the Federal Reserve Bank of St. Louis.

Low rates usually signal a struggling economy. Rates will probably stay low as the US continues to deal with the coronavirus pandemic.

The best refinance rates for Saturday, January 9, 2021

Rates from Bankrate.

Refinance rates are still low overall. They've increased by a couple basis points since last Saturday, but they've decreased since this time last month. 

These rates were last updated on Friday.

How do 30-year fixed rates work?

A 30-year fixed-rate mortgage locks in your rate for the entire life of your loan, and you'll pay off the mortgage over 30 years.

A 30-year fixed mortgage charges a higher rate than a mortgage with a shorter term. The 30-year fixed rates used to be higher than adjustable mortgage 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 15-year or 10-year term. 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 shorter-term mortgage, because a) the rate is higher, and b) you'll be paying interest for longer.

How do 15-year fixed rates work?

With a 15-year fixed term, you'll pay down your mortgage over 15 years, and your rate is locked in for the entire time.

You'll pay less on a 15-year mortgage than on a 30-year loan, for two reasons: 15-year fixed rates are lower, and you'll pay off the mortgage in half the time.

Your monthly payments will be higher than with a 30-year mortgage, though. You're squeezing the same loan principal into a shorter amount of time, so you'll pay more each month.

How do 10-year fixed rates work?

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

It isn't very common to get a 10-year term on an initial mortgage, but you may refinance into a 10-year mortgage.

How do 5/1 ARMs work?

While a fixed-rate mortgage locks in your rate for the entire loan term, an adjustable-rate mortgage locks in the rate for the first few years, then changes it periodically. With a 5/1 ARM, your rate stays the same for the first five years, then increases or decreases once per year.

ARM rates are low right now, but you still might want to go with a fixed-rate mortgage instead. 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 with an ARM.

Adjustable rates used to be lower than fixed rates during the introductory rate period, but this is no longer the case. This means ARMs are less beneficial than they used to be.

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.

Ways to get a low mortgage rate

It may be a good time to apply for a mortgage, but it's not a big deal if you aren't ready yet. Mortgage rates should stay low for a long time, so you'll probably have time to take advantage of low rates.

To get the lowest rate possible, consider working to improve your finances. Here are some tips for locking in a low mortgage rate:

• Increase 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, the better.
• Save more for a down payment. Some types of mortgages require a 10% down payment, while USDA and VA loans don't make you place a down payment at all. But the higher your down payment, the lower your rate will likely be. Because rates should stay low for a while, you probably have time to save more.
• 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. Most lenders want to see a DTI of 36% or less, but an even lower DTI can lend you a better rate. Consider paying down some debts, such as credit cards or personal loans, to get a lower ratio.

If your finances are strong, you could lock in a good mortgage rate right now. But if not, you have plenty of time to make improvements and get a better rate.

Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews.

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