Today's best mortgage and refinance rates: Thursday, September 10, 2020

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Mortgage rates and refinance rates have both fluctuated since this time last week and last month. But if you look at rates six months or a year ago, you can see a steady downward trend. If your finances are in order, then this could be a good time to get a mortgage or refinance your home.

The best mortgage rates Thursday, September 10, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.86%2.93%2.88%
15-year fixed2.37%2.42%2.44%
5/1 ARM3.11%2.93%2.90%

Rates from the Federal Reserve Bank of St. Louis.

The 30-year and 15-year fixed rates have decreased since last Thursday and since this time last month. The 5/1 ARM rates have been steadily increasing, and the average 5/1 ARM rate is now above 3.00%.

Rates have remained low overall, though. The trending decline becomes more obvious 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%3.29%3.49%
15-year fixed2.37%2.79%3.00%
5/1 ARM3.11%3.18%3.30%

Rates from the Federal Reserve Bank of St. Louis.

Although 5/1 ARM rates have been increasing in recent weeks, they're still lower than they were earlier in 2020 and in 2019.

Several factors affect mortgage rates. Rates typically decrease in response to a struggling economy. As the coronavirus pandemic and economic crisis continue, you'll likely see rates stay low, and they could keep going down.

The best refinance rates Thursday, September 10, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed3.10%3.09%3.13%
15-year fixed2.53%2.56%2.66%
10-year fixed2.61%2.61%2.67%

Rates from Bankrate.

The 30-year fixed refinance rate has increased by one basis point since last Thursday, and the 15-year fixed rate has decreased by a few basis points. The 10-year fixed rate has remained steady. Rates have decreased across the board since this time last month.

How do 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.

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 because a) the rate is higher, and b) your interest is also spread out over a longer period of time.

How do 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 do 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 do 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.

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.

An adjustable-rate mortgage can be good for people who plan to move before the introductory period ends. You'll pay less per month than with a 30-year mortgage. Even though you're still spreading payments out over 30 years, you're paying a lower rate than you would with a 30-year loan.

You'll pay less than with a 15-year mortgage, because you aren't trying to pay back the entire loan in a shorter amount of time.

However, a fixed-rate mortgage might be better if you plan to stay in the home for a long time, because you risk rates increasing by the time the introductory period ends. As a result, you could pay more in the long run.

Is it time to get a mortgage or refinance your home?

Mortgage and refinance rates are at historic lows right now, so it could be a good time to take steps forward.

If your finances are in order, consider refinancing soon. 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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