The best mortgage and refinance rates today: Wednesday, August 26, 2020

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.Mortgage typeAverage rate todayAverage rate last weekAverage rate last month30-year fixed2.99%2.96%3.01%15-year fixed2.54%2.46%2.54%5/1 ARM2.91%2.90%3.09%Rates from the Federal Reserve Bank of St. Louis.The average mortgage interest rates for Wednesday, August 26, are slightly higher than this time last week.Thirty-year fixed rates and 5/1 ARM rates are lower than they were a month ago, while 15-year fixed rates are the same.The trending decrease becomes more obvious when you look at rates from six months or a year ago:Mortgage typeAverage rate todayAverage rate 6 months agoAverage rate 1 year ago30-year fixed2.99%3.49%3.55%15-year fixed2.54%2.99%3.03%5/1 ARM2.91%3.25%3.32%Rates from the Federal Reserve Bank of St. Louis.Rates have been steadily declining in response to numerous factors. The coronavirus pandemic and economic crisis can be reflected in lower mortgage rates, because rates are typically lower when the economy is struggling.Mortgage typeAverage rate todayAverage rate last weekAverage rate last month30-year fixed3.25%3.27%3.16%15-year fixed2.70%2.76%2.74%10-year fixed2.83%2.76%2.77%Rates from Bankrate.Thirty-year and 15-year refinance rates are lower than last Wednesday, but 10-year refinance rates are higher.Thirty-year and 10-year refinance rates are higher than this time last month, but 15-year rates are a few basis points lower.The 30-year fixed rates are higher than 15-year fixed or 5/1 ARMs. Your monthly payments will be lower compared to the other types of loans, because your principal is spread out over a longer period of time.But you’ll pay more in interest because a) the rate is higher, and b) your interest is also spread out over a longer period of time.A 15-year fixed rate is lower than what you’ll pay for a 30-year mortgage. Monthly payments will likely be higher, because you’re paying off the principal in half the time.You’ll save money in the long run, though, since you won’t be paying for as long and the rate is lower.A 10-year fixed-rate mortgage isn’t super common for an initial mortgage. But you might refinance into a 10-year mortgage after you’ve paid down some of your loan.Rates are similar to what you’ll pay for a 15-year fixed-rate mortgage, but you’ll pay off your loan faster.A 5/1 adjustable rate is lower than the 30-year fixed rate but higher than the 15-year fixed rate.With a 5/1 ARM, a low rate is locked in for the first five years. Then your rate changes once per year for the remaining 25 years.This type of mortgage can be good for people who plan to move before the introductory period ends. You’ll pay less per month than with a 30-year mortgage, because you’re still spreading payments out over 30 years. But your rate is lower than with a 30-year loan.You’ll pay less than with a 15-year mortgage, because you aren’t trying to pay back the entire loan in a shorter amount of time.However, a fixed-rate mortgage might be better if you plan to stay in the home for a long time, because you risk rates increasing by the time the introductory period ends.Although mortgage rates are up by a couple basis points from last week, and some refinance rates are higher than last month — in general, rates are at historic lows right now. This could be a good time to buy a home or refinance.Many economists believe rates will stay low into 2021, though, so you don’t necessarily need to rush. If you’re trying to land the lowest rate, consider taking some of the following steps before submitting an application:Increase your credit score by paying down high-interest debt and making payments on time. A score of at least 700 will help you out — but the higher, the better.Save more for a down payment. You don’t necessarily need a 20% down payment to get a good rate, but the more you save, the better your rate will likely be. If you don’t have much for a down payment right now, then it could be worth saving for a few more months, since rates are likely to stay low.Lower your debt-to-income ratio. Your debt-to-income ratio is the amount you pay toward debts each month, divided by your gross monthly income. Lenders want to see a debt-to-income ratio of 36% or less. Consider paying down some debts to get a lower ratio.But if you feel comfortable with your financial situation, then now could be a good time to buy or refinance.

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