by Maurie Backman | Updated July 19, 2021 - First published on Aug. 27, 2020
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Mortgage rates are slightly up, but still low, so it still pays to apply.
Mortgage rates are constantly changing. Not only can they fluctuate from one day to the next, they can even dip or climb within the same day. That's why it's important to keep track of rates if you're in the market for a new home. Here's what today's rates look like:
|30-Year Fixed Mortgage Rate||3.016%||3.176%|
|20-Year Fixed Mortgage Rate||3.014%||3.168%|
|15-Year Fixed Mortgage Rate||2.578%||2.770%|
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Though most mortgage rates climbed this week, the 30-year mortgage dipped slightly, and today's rate is 3.016%. Based on that, for a $200,000 mortgage, you'll be looking at a monthly payment of $844.50 for principal and interest on your loan. That amount will not include property taxes, insurance, private mortgage insurance, and any other recurring expenses that come with owning a home, so when you factor that payment into your budget, make sure to account for these other costs as well.
The average interest rate for a 20-year fixed mortgage is 3.014%. Now that is a slight bump from earlier in the week, when the 20-year mortgage was still just below 3%. However, it's still a very competitive rate. For a $200,000 mortgage, today's rate will give you a monthly payment of $1,110.40 for principal and interest on your loan. Clearly, that's more than what you'll pay with a 30-year mortgage despite the average rate for the 30-year and 20-year loan being so comparable. The reason, of course, is that you're paying off your loan in a much shorter time frame, all the while saving yourself money on interest.
The average interest rate for a 15-year fixed mortgage is 2.578%. For a $200,000 mortgage, today's rate gives you a monthly payment of $1,341.12 for principal and interest. Clearly, that's much more than what you'll pay with a 30-year mortgage, but you'll get to knock out your home loan in half the time and save a lot of money on interest.
The average interest rate for a 5/1 ARM is 3.270%. That's a slight jump from earlier in the week. It's also higher than the average rate for the 30-year mortgage, and for that reason, a 5/1 ARM makes little sense today. With a 5/1 ARM, your mortgage rate stays the same for five years, after which it adjusts once annually. Now there is a chance that with an ARM, your rate will adjust downward, but there's no guarantee that will happen. As such, an ARM really only pays when the rate you can lock in initially is lower than what you'll get with a 30-year fixed loan.
A mortgage rate lock guarantees you a certain interest rate for a preset period of time -- usually 30 days, but you may be able to secure 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 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. But if your closing is more than a month 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 low, we don't know if rates will go up or down over the next few months. As such, it pays to:
If you're thinking of locking in a mortgage based on today's rates, be sure to reach out to different mortgage lenders to gather offers. Each lender sets its own criteria with regard to factors like:
Therefore, don't just accept the first offer you get. Instead, shop around, because doing so could really save you a lot of money in the long run.
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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