Today's Mortgage Rates -- September 16, 2020: Rates Remain Very Competitive

Average daily mortgage rates for Sept. 16 remain near record lows. Here's what prospective homeowners need to know.

Average daily mortgage rates for Sept.16 remain near record lows. Here's what prospective homeowners need to know.

If you're purchasing a home, it's helpful to keep tabs on mortgage rates as even a small difference in your interest rate could have a profound effect on total payment costs given the fact you're borrowing a lot of money for a long time. The good news for prospective homeowners or homeowners looking to refinance is that rates have been trending very low in recent weeks, making home loans much more affordable. Here's what you need to know about average rates for Sept. 16, 2020.

Data source: The Ascent's national mortgage interest rate tracking.

30-year mortgage rates

The average interest rate on a 30-year fixed-rate mortgage is 2.948% for Sept. 16. At today's current average rates, you'll pay $419 in principal and interest costs for each $100,000 in borrowed funds. This does not include taxes, home insurance, HOA fees, or private mortgage insurance (PMI). You can check out The Ascent's mortgage calculator to see what your monthly payment might be and how much the loan will ultimately cost you depending how much you borrow. You can also find out how much money you'd save by snagging a lower interest rate, making a larger down payment, or opting for a shorter loan term.

20-year mortgage rates

The average interest rate on a 20-year fixed-rate mortgage is 2.980% for Sept. 16. At today's average rates, you'll pay $554 in principal and interest costs for each $100,000 you borrow. Although the average rate on a 20-year loan is a bit higher than on a 30-year loan, that's not what's driving the higher payment. A shorter repayment timeline means your monthly costs are higher but total interest costs are lower and you'll become debt-free faster.

15-year mortgage rates

For a 15-year fixed-rate mortgage, the average interest rate is 2.453% as of Sept. 16. A 15-year loan at today's average rate would come with a monthly principal and interest payment of $665 per month for each $100,000 borrowed. Again, monthly payments are higher because of the shorter timeline for paying back the loan. However, since you become debt-free in half the time, total interest costs are much lower than for a 30-year loan.

5/1 ARMs

The average interest rate for a 5/1 ARM is 3.372% for Sept. 16. This would result in an initial monthly principal and interest payment of $442 for each $100,000 borrowed, assuming your loan was amortized over 30 years. However, ARM stands for adjustable-rate mortgage. With a 5/1 ARM, your initial interest rate is locked in for five years but can change once annually thereafter. Your monthly payment could fluctuate as your interest rate changes, sometimes becoming more expensive if rates rise.

Should I lock in a mortgage right now?

A mortgage rate lock guarantees you a certain interest rate for a specified period of time -- usually 30 days, but you may be able to secure your rate for up to 60 days. You'll generally pay a fee to lock in your mortgage rate, but that way, you're protected in case rates climb between now and when you actually close on your mortgage.

If you plan to close on your home within the next 30 days, then it pays to lock in your mortgage rate based on today's rates -- especially since they're so competitive. But if your closing is more than 30 days away, you may want to choose a floating rate lock instead for what will usually be a higher fee, but one that could save you money in the long run. A floating rate lock lets you secure a lower rate on your mortgage if rates fall prior to your closing, and while today's rates are still quite low, we don't know if rates will go up or down over the next few months. As such, it pays to:

• LOCK if closing in 7 days
• LOCK if closing in 15 days
• LOCK if closing in 30 days
• FLOAT if closing in 45 days
• FLOAT if closing in 60 days

While rates are near record lows, not every lender will offer you the most competitive rate. Before locking in, make sure you get quotes from at least three different mortgage lenders to see which offers you the best rates. Compare both interest and closing costs to find out which loan is most affordable for you both up front and over time. By taking the time to comparison shop and reviewing loan terms carefully, you can find the mortgage loan that's right for you.