by Maurie Backman | Aug. 20, 2020
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Mortgage rates are still fairly low. Are you ready to lock one in?
Mortgage rates are always changing, and paying attention to how they’re trending can help you lock in a good deal. Ultimately, the rate you wind up with will depend on your credit score and other factors, including your loan amount. But this is what rates are averaging right now:
|30-Year Fixed Mortgage Rate||3.010%||3.169%|
|20-Year Fixed Mortgage Rate||3.005%||3.154%|
|15-Year Fixed Mortgage Rate||2.589%||2.786%|
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The average interest rate for a 30-year fixed mortgage today is 3.010%, which is a slight decrease from earlier in the week. While the 30-year mortgage has fallen below 3% recently, today’s rate is still extremely competitive. For a $200,000 mortgage, you'll be looking at a monthly payment of $844.50 for principal and interest. Other expenses, like property taxes and private mortgage insurance, are not included in that calculation.
The average interest rate for a 20-year fixed mortgage is 3.005%. For a $200,000 mortgage, you'll have a monthly payment of $1,109.20 for principal and interest. Clearly, your monthly payment will be higher with a 20-year loan than with a 30-year mortgage, but you'll pay less interest on your loan and be debt-free sooner.
The average interest rate for a 15-year fixed mortgage is 2.589%. That's a slight decrease from earlier in the week and a really low rate to lock in on a whole. For a $200,000 mortgage, that gives you a monthly payment of $1,342.26 (again, that's for principal and interest). If you have room in your budget to take on a higher mortgage payment, it makes sense to lock in a 15-year loan at today's rate.
The average interest rate for a 5/1 ARM is 3.278%, and that's a decent rate to lock in for a five-year period. But since the average rate for a 30-year fixed mortgage is lower, an ARM doesn't offer a ton of value right now. After all, why take the risk of your interest rate going up if you're not getting a discount up front? Of course, the interest rate on an ARM can also adjust downward, but there's no way to predict whether that will happen, so given today's rates, a 30-year loan may be a safer bet.
A mortgage rate lock guarantees you a specific rate for a specific period of time -- usually 30 days, but you may be able to lock in your rate for up to 60 days. You'll usually pay a fee to lock in your mortgage rate, but that way, you're protected if rates climb between now and when you close on your home loan.
If you plan to close on your home within the next month, then it pays to lock in your mortgage rate based on today's average rates. But if your closing is more than a month away, you may want to choose a floating rate lock instead for what will generally 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 low, we don't know if rates will go up or down over the next few months. As such, it pays to:
Either way, it pays to shop around with different mortgage lenders before locking yourself into a rate that you could end up paying for the next 30 years. One lender might offer you a better rate than another based on your credit score, income, existing debt, and loan amount, so be sure to get at least a few offers to compare.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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