by Maurie Backman | Aug. 11, 2020
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This is what mortgage rates look like today. Should you rush to lock in?
Mortgage rates are constantly changing. If you're looking to buy a new home, it pays to see what they look like from day to day, because that gives you an opportunity to snag a really great deal. This is what mortgage rates are averaging today:
|30-Year Fixed Mortgage Rate||2.996%||3.177%|
|20-Year Fixed Mortgage Rate||2.998%||3.152%|
|15-Year Fixed Mortgage Rate||2.575%||2.804%|
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The average interest rate for a 30-year fixed mortgage today is 2.996%. That's an exceptionally-low rate and one worth locking in. For a $200,000 mortgage, you'll be looking at a monthly payment of $843 with a 2.996%, 30-year fixed mortgage. Now to be clear, that $843 is just principal and interest; it does not include property taxes or other costs, like insurance and HOA fees.
The average interest rate for a 20-year fixed mortgage is 2.998% -- another great deal. For a $200,000 mortgage, you're looking at a monthly payment of $1,109.20 for principal and interest. Clearly, that's more than what you'll pay each month with a 30-year loan, but you'll also save a lot of money on interest over the life of your repayment period.
The average interest rate for a 15-year fixed mortgage is 2.575%. Even for a 15-year loan, a mortgage rate of under 3% is a great deal, which means today's rate is outstanding. For a $200,000 mortgage, you're looking at a monthly payment of $1,341.12 which, again, only includes principal and interest. If you can afford that higher monthly payment, you stand to not only save a lot on mortgage interest, but knock out your home loan in a relatively short period of time as well.
The average interest rate for a 5/1 ARM is 3.210%, and generally speaking that's a competitive rate to lock in for the next five years. But given that the average rate for a 30-year fixed mortgage is only 2.996%, it makes more sense to go with a 30-year loan today, because that way, you're guaranteed that lower rate for three decades. With a 5/1 ARM, you're only guaranteed your starting rate for five years, after which your rate adjusts once annually.
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 pays to lock in your rate based on how today's numbers look. On the other hand, 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 saves you money in the long run. A floating rate lock allows you to snag a lower rate on your mortgage if rates fall prior to your closing, and while today's rates are very competitive, we don't know what the next few months have in store. As such, it pays to:
If you really want to lock in a mortgage today, shop around with different mortgage lenders first. You may find that your credit score, debt-to-income ratio, and income land you one deal with one lender, and a slightly better or worse deal with another. Round up a few offers and then assess your options to increase your chances of walking away happy.
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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