Current Mortgages -- September 30: Slight Downward Shift Is Good News for Borrowers

Mortgage rates have fallen slightly for both 15- and 30-year mortgages... which is good news for borrowers.

Mortgage rates for Sept. 30, 2020 have dropped slightly for both 15- and 30-year loans, continuing to hover near record lows. For yet another day, the average rate on a 30-year loan has remained under 3.00% while 15-year loans can be had for an average rate under 2.50%. These affordable rates are a boon to would-be buyers as well as those considering a refinance loan. Here's what you need to know about today's average rates.

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

30-year mortgage rates

The average 30-year mortgage rate today is 2.921%, down .012% from yesterday's average rate of 2.933%. This rate has dropped slightly today but over time has remained remarkably steady, varying little and remaining below 3.00%. Rates this low are unprecedented and, at today's average rate, you would be looking at a monthly payment of just $417 in principal and interest per $100,000 borrowed. Total interest costs over the life of the loan are $50,248 per $100,000 in debt if you qualify for a loan at today's average rate.

Check out The Ascent's mortgage calculator to see what your monthly payment might be and how much your loan will ultimately cost. Also learn how much money you'd save by snagging a lower interest rate, making a larger down payment, or choosing a shorter loan term.

20-year mortgage rates

The average 20-year mortgage rate today is 2.852%, up .03% from yesterday's average of 2.822%. At today's average rate, monthly principal and interest costs would total $547 per $100,000 in mortgage debt and total interest costs over the loan's life would be $31,332 per $100,000.

Although the rate is slightly below the 30-year rate, you'll notice a big difference in both the monthly payment and total interest costs compared with the longer loan term. That's because you're paying off your loan a decade faster. This necessitates higher monthly payments but the interest savings are substantial.

15-year mortgage rates

The average 15-year mortgage rate today is 2.420%, down .024% from yesterday's 2.444% average. At today's average rate, you would have monthly principal and interest payments of $663 per $100,000 in mortgage debt and total interest costs of $19,345 for each $100,000 borrowed.

Again, the 15-year loan has a much higher monthly payment but a lower total interest cost than either of the two mortgages with longer terms. Cutting either five or 15 years off your repayment time makes a substantial difference in both how much you pay each month as well as the cost of borrowing over time.

5/1 ARMs

The average 5/1 ARM rate is 3.705%, down .076% from yesterday's average of 3.781%. Because the starting interest rate is above the rate on a 30-year loan, borrowers should generally avoid an ARM.

That's the case because ARM stands for adjustable-rate mortgage. With an ARM, your loan rate is only locked in for a limited time (five years, in this case, since it's a 5/1 ARM). After that time, the rate can adjust up or down. Since rates are extremely low right now, there's a good chance the rate would go higher once it begins adjusting, thus raising your monthly payment.

Taking a chance on an adjustable-rate loan can be a smart choice if you can qualify for a lower starting interest rate and have plans to sell or refinance before a potential rise in rates. You trade the predictability of a fixed-rate loan for the low starting rate. But there's no reason to take a chance of rates going up when you'd be starting at a higher rate and giving up the predictability of a fixed monthly payment for the life of the loan.

Should I lock my mortgage rate 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

Mortgage rates can vary from lender to lender, so before you lock in, check out some of the best mortgage lenders and compare rates and terms. By getting at least three quotes from different mortgage loan providers, you can make sure your home loan is the best one possible for your financial situation.