Today's best mortgage and refinance rates: Thursday, November 12, 2020

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Mortgage rates have balanced out since this time last Thursday. The 30-year refinance rates have increased since last Thursday, 15-year refinance rates have decreased, and 10-year refinance rates have remained mostly the same.

Rates are low in general, so it could be a good time to lock in a low mortgage rate. You'll probably get a better deal with a fixed-rate mortgage, not an adjustable-rate mortgage.

A fixed-rate mortgage locks in your rate for the entire life of the loan. An adjustable-rate mortgage keeps your rate the same for the first few years, then adjusts it once per year. Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that typically there's an advantage to an adjustable-rate mortgage, like a lower interest rate.

However, he points out that ARMs don't currently follow that pattern. Fixed rates are better than adjustable rates right now, because lenders want to keep customers banking with them for as long as possible. The 30-year fixed rate is lower than the 5/1 ARM rate this week. And 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 a good place, then it could be a good time to get a fixed-rate mortgage or refinance.

The best mortgage rates Thursday, November 12, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 2.78% 2.78% 2.87%
15-year fixed 2.32% 2.32% 2.37%
5/1 ARM 2.89% 2.89% 2.89%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates have remained steady since last Thursday. The 5/1 adjustable rates have also stayed the same since this time last month, while fixed mortgage rates have decreased.

Overall, mortgage rates are low right now. The trend downward becomes more apparent when you look at rates from 6 months and a year ago:

Mortgage type Average rate today Average rate 6 months ago Average rate 1 year ago
30-year fixed 2.78% 3.26% 3.69%
15-year fixed 2.32% 2.73% 3.13%
5/1 ARM 2.89% 3.17% 3.39%

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 Thursday, November 12, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 3.16% 3.06% 3.18%
15-year fixed 2.58% 2.72% 2.59%
10-year fixed 2.59% 2.58% 2.63%

Rates from Bankrate.

The 30-year refinance rates have gone up since last Thursday, and 15-year refinance rates have gone down. The 10-year refinance rates have barely changed. The 30-year refinance rates have mostly held steady since this time last month, as have 15-year rates, while 10-year refinance rates have dropped.

How 30-year fixed mortgage rates work

You'll pay a higher interest rate on a 30-year fixed mortgage than on a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but recently 30-year terms have been the better deal.

Monthly payments are relatively low for a 30-year term, because you're spreading payments out over a longer period of time than you would with a shorter term.

You'll ultimately pay more in interest with a 30-year term than you would for a 15-year mortgage, because a) the rate is higher, and b) you'll be paying interest for longer.

How 15-year fixed mortgage rates work

You'll pay less on a 15-year mortgage than on a 30-year loan, for two reasons: 15-year fixed rates are lower, and you'll pay off the mortgage in half the time.

Your monthly payments will be higher than with a 30-year mortgage, though. You're squeezing the same loan principal into a shorter amount of time, so you'll pay more each month.

How 10-year fixed mortgage rates work

A 10-year term isn't super common for initial mortgages, but you might refinance into a 10-year mortgage.

The 10-year refinance rates are similar to 15-year rates, but you'll pay off your mortgage earlier.

How 5/1 adjustable mortgage rates work

With an adjustable-rate loan, your rate stays the same for the first few years, then changes periodically. Your rate is locked in for the first five years on a 5/1 ARM, then your rate increases or decreases once per year.

ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. It could be in your best interest to lock in a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing later with an ARM.

If you're considering an ARM, you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus adjustable-rate mortgage.

Is it a good day to get a mortgage or refinance?

Refinance rates are low right now, so if your finances are strong, you may want to refinance in the next few weeks. Starting December 1, most borrowers will pay a 0.5% fee for refinancing. If you lock in a rate before December 1, you won't have to pay this closing fee.

But if your finances could use some work, it may be better to hold off on refinancing. A poor credit score or a high debt-to-income ratio will result in a higher interest rate, which could be more expensive than the 0.5% closing fee in the long run.

Whether you want to refinance or buy a home, a fixed-rate mortgage is probably the best deal. Fixed rates are at historic lows right now. English doesn't recommend applying for an ARM, though.

"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?"

You don't necessarily need to rush to get a new mortgage, though. Mortgage rates will likely stay low well into 2021, if not longer. If you want to land the lowest rate, think about taking some of the following steps before submitting an application:

  • Increase your credit score. A score of at least 700 will help you out — but the better your score, the better your interest rate. The most important factor in boosting your credit score is making all your payments on time. You can also pay off debts aggressively, or let your credit age.
  • Save more for a down payment. For a conventional mortgage, you might be able to place as little as 3% down. But lenders reward higher down payments with lower rates, so you may want to save even more. Because rates should stay low for a while, you probably have time to save more for a down payment.
  • Lower your debt-to-income ratio. Your DTI is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI of 36% or less, but a lower ratio can result in a lower rate. To improve your DTI, look for chances to increase your income or pay down debts.

If you feel comfortable with your financial situation, now could be a good time to get a fixed-rate mortgage or refinance.

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