by Maurie Backman | July 7, 2020
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This is what mortgage rates look like today. What's the right loan term for you?
Mortgage rates are constantly in flux, so if you're looking to buy a new home, it pays to keep tabs on how they're trending. Today, mortgage rates are down across the board, so now may be a good time to lock one in.
Here's what today's rates look like:
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|30-Year Fixed Mortgage Rate||3.35%||3.43%|
|20-Year Fixed Mortgage Rate||3.22%||3.30%|
|15-Year Fixed Mortgage Rate||2.78%||2.91%|
The average interest rate for a 30-year fixed mortgage today is 3.35%, down from 3.48% last week. For context, 3.48% is a truly great deal, while 3.35% is really an exceptional offer, assuming your credit score is high enough that you qualify. For a $200,000 mortgage, you'll be looking at a monthly payment of $1,440 with a 3.35%, 30-year fixed mortgage.
The average interest rate for a 20-year fixed mortgage is 3.22%, down from 3.36% last week. And make no mistake about it: This is a very good deal. For a $200,000 mortgage, you're looking at a monthly payment of $1,690. Granted, that is more than what you'll pay compared to a 30-year loan, but the amount of interest you'll fork over in the course of your repayment period will be substantially less ($71,558, versus $117,424 with a 30-year loan at today's rates).
The average interest rate for a 15-year fixed mortgage is 2.78%, down slightly from last week. Even for a 15-year loan, a mortgage rate of under 3% is a great deal, so if you're able to swing a higher monthly payment, it could be worth it to lock in. For a $200,000 mortgage, you'll pay $1,919 a month at today's average 15-year rate.
The average interest rate for a 5/1 ARM is 2.74%, and that's a really competitive rate to lock in for the next five years. Once that five-year period is over, though, your interest rate will adjust once a year. It may adjust upward, but it could adjust downward. Since the rate for a 5/1 ARM is so comparable to that of a 15-year mortgage, you may want to choose the latter if you can swing the monthly payment involved, because that way, you're guaranteed that fabulous rate throughout your entire repayment period.
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 extremely competitive, we don't know what the next month or so will bring -- meaning, rates could fall even further beyond a 30-day time frame.
Locking in a mortgage today is a smart move given the rates that may be available to you. But before you commit to an offer, shop around with different mortgage lenders and see what rates you're eligible for. Lenders set their own standards when it comes to approving mortgage applicants, so you may find that your credit score renders you eligible for a range of rates. Once you gather a few, you'll be able to identify the one that's most competitive so you can lock in an affordable mortgage that's easily manageable.
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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