Today's best mortgage and refinance rates: Thursday, December 3, 2020

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Mortgage rates haven't changed much since last Thursday. Some mortgage refinance rates have decreased, while others have stayed the same. These days, you'll probably get a better deal with a fixed-rate mortgage than an adjustable-rate mortgage.

Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that adjustable-rate mortgages are less beneficial for borrowers than they used to be. ARM rates are starting higher than fixed-rate mortgages, and you'd risk your rate increasing later. It's probably better to lock in a historically low interest rate now with a fixed-rate mortgage.

If your finances are in a good place, it could be a good time to get a fixed-rate mortgage or refinance.

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.71%2.72%2.81%
15-year fixed2.26%2.28%2.32%
5/1 ARM2.86%2.85%2.88%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates have only shifted by one or two basis points since last Thursday, and they've decreased since this time last month.

Mortgage rates are at all-time lows in general. The trend downward becomes more obvious when you look at rates from 6 months and a year ago:

Mortgage typeAverage rate todayAverage rate 6 months agoAverage rate 1 year ago
30-year fixed2.71%3.15%3.68%
15-year fixed2.26%2.62%3.15%
5/1 ARM2.86%3.13%3.43%

Rates from the Federal Reserve Bank of St. Louis.

Several factors affect mortgage rates. Lower rates are usually a sign of a struggling economy. As the coronavirus pandemic and economic crisis continue, rates will likely stay relatively low.

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.98%3.05%3.11%
15-year fixed2.44%2.48%2.72%
10-year fixed2.50%2.50%2.58%

Rates from Bankrate.

The 30-year and 15-year refinance rates have gone down by a few basis points since last Thursday, while 10-year refinance rates have held steady. Refinance rates have decreased across the board since this time last month.

A 30-year fixed-rate mortgage charges a higher interest rate than a 15-year or 10-year fixed-rate mortgages. For a long time, you'd also pay a higher rate on a 30-year fixed mortgage than on a 5/1 ARM. But right now, 30-year fixed rates are the better deal.

You'll pay more in interest in the long term with a 30-year term than you would for a 15-year or 10-year term, because a) the rate is higher, and b) you'll be paying interest for longer.

The good news is that you'll pay less each month on a 30-year term than on a shorter term, so you're spreading your payments out over a longer period of time.

You'll pay less on a 15-year fixed-rate mortgage than on a 30-year mortgage over the years, for two reasons: The 15-year mortgage charges a lower interest rate, and you'll pay off your mortgage in half the time.

Your monthly payments will be higher on a 15-year mortgage, though. You're paying off the same amount of money in a shorter amount of time, so you'll pay more each month.

Many lenders offer similar rates on 10-year mortgages and 15-year mortgages, but you'll pay off your mortgage five years earlier.

You might refinance into a 10-year mortgage, but a 10-year term isn't super common for an initial mortgage.

An adjustable-rate mortgage, often referred to as an ARM, keeps your rate the same for the first few years, then changes it periodically. A 5/1 ARM locks in your rate for the first five years, then your rate will fluctuate once per year.

Although ARM rates are relatively low these days, you still may want to go with a fixed-rate mortgage. The 30-year fixed rates are comparable to or lower than ARM rates, so it could be good to lock in a low rate with a fixed mortgage rather than risk your rate going up 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.

Whether you want to get an initial mortgage or refinance, it could be a good time to get a fixed-rate mortgage. Fixed rates are at all-time lows right now. English doesn't recommend applying for an adjustable-rate mortgage, 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 apply for a new mortgage. Rates will likely stay low well into 2021, if not longer. If you want to land the best rate possible, consider taking some of the following steps before submitting an application:

  • Boost your credit score by making payments on time, paying down debt, and letting your credit age. A score of at least 700 will help you out — but the higher your score, the better your interest rate.
  • Save more for a down payment. With a conventional loan, you may be able to put down as little as 3%. But lenders usually reward a higher down payment with a lower interest rate. Because rates should stay low for a while, you probably have time to save more.
  • 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 an even lower DTI can result in a better rate. To improve your ratio, pay down debts or look for opportunities to increase your income.

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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