by Christy Bieber | Sept. 9, 2020
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The Labor Day holiday has come and gone and we continue to see 30-year mortgage rates near record lows.
With many homebuyers wondering how long mortgage rates can stay so low, today brings good news: You don't have to worry about them going up just yet. In fact, average rates for a 30-year fixed-rate mortgage remained below 3.00% for another day, which was hard to imagine just a short time ago. Locking in your loan at this rate could make repayment much more affordable, which is good news as demand for new homes remains high and prices show no signs of falling.
To help you decide if now is a good time to borrow, check out today's average mortgage rates for Sept. 9.
|30-Year Fixed Mortgage Rate||2.937%||3.106%|
|20-Year Fixed Mortgage Rate||2.988%||3.141%|
|15-Year Fixed Mortgage Rate||2.476%||2.864%|
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Rates have repeatedly fallen below the 3.00% threshold in recent days, but you shouldn't take these low rates for granted. Any time you can lock in a mortgage rate below 3.00%, you're getting a deal that homeowners in the past could only have dreamed of. For Sept. 9, if you can lock in at today's average rate of 2.937%, the monthly payments for principal and interest on a $200,000 loan would be just $836 and total loan repayment costs would come in at $301,114.
Fixed 20-year mortgages have average interest rates of 2.988% as of Sept. 9, which is surprisingly a bit higher than the average rates for a 30-year loan. Usually, longer-term mortgages have higher rates than shorter ones, but that hasn't been the case in recent days with the 20-year and 30-year loans.
Although your rate would be slightly higher if you opt for a 20-year loan than a 30-year loan, your total repayment costs would be substantially lower due to the fact you're paying interest for a full decade less. Of course, this accelerated repayment timeline leads to higher monthly payments. On a $200,000 loan, you'd be looking at a monthly payment of $1,108 if you locked in at today's average rate. Your total repayment costs would be just $265,919 though.
A 15-year mortgage provides substantial interest savings because you pay off your loan 15 years earlier than with a 30-year mortgage and you can qualify for a loan at an incredibly low rate. At today's average interest rate of 2.476%, a $200,000 loan would cost you just $238,638 to pay off. However, since you'd be paying off your loan in a very short time, your monthly payment for principal and interest would come to $1,331. This may be out of your budget, but if you can swing the higher payment, the interest savings might be worth it.
ARMS are adjustable-rate mortgages, which means the interest rate is tied to a financial index and can move up and down. Most ARMS have an initial fixed interest rate for a period of time. With a 5/1 ARM, that period would be five years. The starting rate is usually lower than for a fixed-rate loan, so securing an ARM can make sense for those who want a rock-bottom rate and who plan to move or refinance before it could adjust upward.
With the initial interest rate for a 5/1 ARM higher than that of a 30-year fixed-rate loan, there's little reason to take the risks associated with an adjustable-rate mortgage -- especially since it is highly unlikely your rate would adjust down in the future due to how low interest rates currently are.
A mortgage rate lock guarantees you a specific rate for a preset period of time -- usually 30 days, but you may be able to lock in your rate for up to 60 days. You'll generally pay a fee for a mortgage rate lock, but in exchange, you're protected in the event that there's a substantial jump in rates between now and your loan closing date.
If you plan to close on your home within the next month, then it could pay to lock in your rate based on how today's numbers look, and also based on recent rate fluctuations. Today's rates are actually quite competitive across the board, so no matter what loan term you're interested in, you have a chance to lock in a good deal.
However, 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 a potentially worthwhile one. A floating rate lock allows you to snag a lower rate on your mortgage if rates fall prior to your closing, and given the way rates have moved in recent weeks, there's a chance they could go lower in time.
No matter what you decide, it pays to shop around with multiple mortgage lenders to get the best deal. Qualifying requirements including your credit score and other financial credentials can differ from one lender to another, so you may be able to save substantially more just by comparing offers and choosing the best loan terms for your needs.
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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