by Christy Bieber | Aug. 28, 2020
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Rates for the most-popular mortgage loan type have fallen below 3% again, making it a great time to secure a home loan if you're in the market.
For would-be homeowners, there's some great news about mortgage rates today, As of Aug. 28, 2020, the rate on a 30-year fixed rate mortgage has once again dropped below 3.00%. While rates have been very low in recent weeks, any time you can lock in a fixed-rate loan below 3.00% for 30 years, you're looking at one of the most affordable home loans in history.
Of course, a 30-year loan isn't the only mortgage loan type that's got a very low average interest rate. Take a look at mortgage rates for Aug. 28 to see what you can expect if you're shopping for a home loan.
|30-Year Fixed Mortgage Rate||2.99%||3.154|
|20-Year Fixed Mortgage Rate||2.986%||3.139%|
|15-Year Fixed Mortgage Rate||2.568%||2.768%|
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As mentioned above, the average rate on a 30-year loan dropped back below 3.00% on Aug. 28 after climbing a bit above that threshold in the past few days. With today's average rate of 2.99%, taking a $200,000 30-year fixed rate mortgage would leave you with a monthly principal and interest payment of just $842 (taxes and insurance not included). Total loan repayment costs would be around $303,167. With rates and payments this low, most buyers would do well to lock in.
The average interest rate on a 20-year mortgage on Aug. 28 is just 2.986%, which is a bit below the 30-year rate. Although the rates are very similar, the monthly payment cost on a 20-year loan will be higher and total repayment costs lower due to the shorter timeline for paying back the loan. A $200,000 loan at the average rate for 20 years would give you a monthly payment of $1,108 and a total loan repayment cost of $265,871. If you're willing to pay a higher monthly payment to become debt-free faster, these low rates are well worth locking in.
Average mortgage rates on a 15-year loan are just 2.568% on Aug. 28, which is an incredibly low rate. Of course, you will pay much higher monthly payments than for a 30-year loan, or even a 20-year one, because you're paying off your loan so much faster. This provides tremendous interest savings, if you can afford the higher monthly cost. A monthly payment for principal and interest on a 15-year loan for $200,000 would come in at $1,340 but you would have total loan costs of just $241,198. This is $61,969 below the total costs on a 30-year loan.
5/1 ARM stands for a five-year adjustable-rate mortgage with a fixed interest rate for the first five years, after which the rate can adjust once annually. The average interest rate on a 5/1 ARM as of Aug. 28 is 3.283%. This is higher than the average rate on a 30-year fixed rate loan. Most people take out ARMs if they get a lower starting rate than is available on a fixed-rate loan, which is not the case right now, or if they believe interest rates will fall in the future, which is also probably unlikely as rates are near record lows.
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 still go lower in time.
With rates so low, many homebuyers would do well to lock in, but before you do so, you'll want to get quotes from several mortgage lenders to make sure you're choosing the most affordable mortgage. Remember, credit score requirements and other qualifying criteria can vary from one lender to another, as can rates, so it pays to shop around.
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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