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Fixed mortgage and refinance rates have gone down since last Wednesday, but adjustable rates have gone up.
You may consider a fixed-rate mortgage over an adjustable-rate mortgage if you’re ready to buy or refinance. Experts told Insider that fixed rates are typically better than adjustable rates these days.
Right now, rates on fixed mortgages are starting lower than rates on ARMs. You also risk your rate going up later with an ARM — which is likely, because rates can’t stay this low forever.
Low rates tend to signify a struggling economy. As the US continues to handle the economic impact of the COVID-19 pandemic, rates should stay relatively low.
Rates from Money.com
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Fixed mortgage rates have decreased slightly since last Wednesday, while adjustable rates have increased. Mortgage rates are up overall since this time last month.
We’re providing the average rates nationwide for conventional mortgages, which might be what you think of “normal mortgages.” Government-backed mortgages through the FHA, VA, or USDA may give you a lower rate — provided you’re qualified.
Rates from Money.com
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Fixed refinance rates are down since last Wednesday, and adjustable rates are up. Most mortgage refinance rates have increased since last month, with the exception of 7/1 ARM rates.
Mortgage rates are low overall right now, especially fixed rates. It could be a good time to lock in a rate.
You might not need to hurry if you aren’t prepared to buy or refinance yet, though. Rates will probably stay relatively low for months, if not years. You have time to boost your finances and get an improved interest rate. Consider the following steps:
- Boost your credit score by making payments on all your bill payments on time. You could also pay down debts or let your credit age.
- Put down more for a down payment. The minimum amount you’ll need for your down payment will be contingent on the type of mortgage you want. The bigger your down payment, the more probable your lender will give you a better interest rate.
- Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. To better your ratio, pay down debts or look for ways to raise your income.
- Pick a government-backed mortgage. If you’re eligible, you may want to get a USDA loan (for low-to-moderate-income borrowers buying in a rural area), a VA loan (aimed at military members and veterans), or an FHA loan (not designated for any particular group). These loans often come with lower interest rates than conventional mortgages. Additionally, you aren’t required to make a down payment for USDA or VA loans.
You can secure a low rate today if your finances are in good shape, but you don’t need to rush to get a mortgage or refinance if you’re not prepared.
If you take out a 15-year fixed mortgage, it will take you 15 years to pay off your loan, and you’ll pay the same interest rate the entire time.
You’ll fork over more per month with a 15-year fixed mortgage than a 30-year fixed mortgage, because you’ll pay off the same mortgage principal in half the time.
On the plus side, a 15-year term will cost less than a longer term. You’ll pay off the mortgage years in fewer years, and you’ll get a lower interest rate.
If you take out a 30-year fixed mortgage, you’ll pay the same rate for 30 years. A 30-year term comes with a higher interest rate than a 15-year term.
You’ll pay less per month with a 30-year fixed mortgage than with a shorter term because you’re splitting up your payments over more years.
However, it will cost you more in interest with a 30-year term than with a shorter term, as you’re paying a higher interest rate for longer.
With an adjustable-rate mortgage, you’ll lock in your rate for an agreed-upon amount of time. Then your rate will fluctuate regularly. A 7/1 ARM keeps your rate constant for seven years, then your lender will alter your rate annually.
ARM rates are currently at all-time lows, but you still may want to go with a fixed-rate mortgage. You can avoid the hassle of a potential future rate increase with an ARM and lock in a low rate for the long term.
If you’re considering getting an ARM, find out from your lender what your rates would be if you chose a fixed-rate versus an adjustable-rate mortgage.
Mortgage and refinance rates by state
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Laura Grace Tarpley is an editor at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. She is also a Certified Educator in Personal Finance (CEPF). Over her four years of covering personal finance, she has written extensively about ways to save, invest, and navigate loans.
Ryan Wangman is a reviews fellow at Personal Finance Insider reporting on mortgages, refinancing, bank accounts, and bank reviews. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership.