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.Fixed mortgage rates have increased since last Monday, and adjustable rates have decreased. Refinance rates have fluctuated since this time last week. Both mortgage and refinance rates are down since this time last month.The 30-year fixed rates and 5/1 adjustable rates are comparable this week. If you lock in a rate today, then you could end up paying more for an ARM than a fixed-rate mortgage over the years.Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that typically there’s an advantage to an adjustable-rate mortgage, in which the rate fluctuates after an initial period. That advantage is usually a lower rate for the fixed period.However, he points out that ARMs don’t currently follow that pattern. Fixed rates are currently better than adjustable rates, because lenders want to keep customers banking with them for as long as possible. Even though the 30-year fixed rate and 5/1 adjustable rate are about the same right now, you’d risk your 5/1 ARM rate increasing in five years, whereas you could lock in a low rate for decades with a 30-year term.If your finances are in order, consider refinancing or getting a fixed-rate mortgage soon.The best mortgage rates Monday, September 28, 2020Mortgage typeAverage rate todayAverage rate last weekAverage rate last month30-year fixed2.90%2.87%2.91%15-year fixed2.40%2.35%2.46%5/1 ARM2.90%2.96%2.91%Rates from the Federal Reserve Bank of St. Louis.The 30-year and 15-year fixed rates are up by a few basis points since last Monday, but the 5/1 ARM rates have decreased by six basis points.Mortgage rates have decreased since this time last month.Overall, mortgage rates are low. The trend downward becomes more apparent when you look at rates from 6 months and a year ago:Mortgage typeAverage rate todayAverage rate 6 months agoAverage rate 1 year ago30-year fixed2.90%3.50%3.64%15-year fixed2.40%2.92%3.16%5/1 ARM2.90%3.34%3.38%Rates from the Federal Reserve Bank of St. Louis.Several factors affect mortgage rates. Decreasing rates are usually a sign of a struggling economy. As the coronavirus pandemic and economic crisis continue, rates will likely stay relatively low.The best refinance rates Monday, September 28, 2020Mortgage typeAverage rate todayAverage rate last weekAverage rate last month30-year fixed3.07%2.97%3.16%15-year fixed2.56%2.49%2.62%10-year fixed2.54%2.45%2.67%Rates from Bankrate.While all three rates have increased in the last week, refinance rates have decreased overall since this time last month.30-year fixed-rate mortgagesThe 30-year fixed-rate mortgages charge higher interest rates than fixed-rate mortgages with shorter terms. In the past, they’ve also had higher rates than adjustable-rate mortgages — but right now, fixed rates are better deals than adjustable rates.Your monthly payments will be lower on a 30-year mortgage than on a shorter-term loan, because the principal is spread out over a longer period of time.The trade-off is that you’ll pay more in interest than you would with a 15-year or 10-year loan, because a) the rate is higher, and b) the interest is also spread out over a longer period of time.15-year fixed-rate mortgagesYou’ll pay a lower interest rate on a 15-year fixed-rate mortgage than on a 30-year mortgage. You’ll save money in the long run because the rate is lower, and you’ll be making payments for half the amount of the time.Your monthly payments will be higher with a 15-year mortgage, though, because you’re paying off the principal in 15 years instead of 30 years.10-year fixed-rate mortgagesA 10-year fixed-rate mortgage isn’t very 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.5/1 adjustable-rate mortgagesWith 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.A 5/1 ARM rate is higher than a 30-year or 15-year fixed rate right now. In the past, ARM rates have been lower, but that isn’t the case in recent weeks. This means ARMs cost more than they used to, and are therefore less beneficial.If you’re considering an ARM, then you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus adjustable-rate mortgage.It could be a good time to get a fixed-rate mortgage or refinanceConsider refinancing soon if your finances are in a good place. Starting December 1, 2020, many borrowers will pay a fee of 0.05% for refinancing. Starting the process now could help you pay less at closing. But if you have a low credit score or high debt-to-income ratio, it still might be better to wait. If your credit score is low or debt-to-income ratio is high, then you could end up paying significantly more in interest.Fixed mortgage rates are at historic lows right now, so you may want to consider getting a new mortgage if your finances are in a good place. But English doesn’t recommend applying for an adjustable-rate mortgage.”I can’t see one good reason why someone would choose to go with an ARM versus a 30-year fixed rate in today’s market,” English said. “Why take the risk when you can get a better rate in a 30-year loan?”If you want to apply for a new mortgage, then you don’t necessarily need to rush. Many economists believe rates will stay low for a long time. 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. If you don’t have money for a down payment, then you could apply for a USDA or VA loan, if you qualify.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, such as credit cards or a car loan, to get a lower ratio.If you feel comfortable with your financial situation, then now could be a good time to get a fixed-rate mortgage or refinance.
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