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Today's best mortgage and refinance rates: Friday, November 20, 2020

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Mortgage rates have gone down since last Friday. Refinance rates have fluctuated, with some rates increasing and some decreasing. Both mortgage and refinance rates have decreased since this time last month.

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 becoming less beneficial for borrowers. ARM rates are starting higher than fixed-rate mortgages, and you'd risk your rate increasing down the road. It's probably better to lock in a historically low interest rate now with a fixed-rate loan.

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

The best mortgage rates Friday, November 20, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 2.72% 2.84% 2.81%
15-year fixed 2.28% 2.34% 2.35%
5/1 ARM 2.85% 3.11% 2.90%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates have decreased since last Friday, and since this time last month.

Mortgage rates are at historic lows overall. 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 2.72% 3.28% 3.75%
15-year fixed 2.28% 2.72% 3.20%
5/1 ARM 2.85% 3.18% 3.44%

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.

The best refinance rates Friday, November 20, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 3.00% 3.10% 3.17%
15-year fixed 2.54% 2.57% 2.64%
10-year fixed 2.56% 2.56% 2.66%

Rates from Bankrate.

Refinance rates have shifted a bit since last Friday. The 30-year rates and 15-year rates have decreased by 10 basis points and three basis points, respectively. The 10-year rates have remained the same. Refinance rates are down overall since this time last month.

How 30-year fixed rates work

A 30-year fixed mortgage comes with a higher interest rate than fixed-rate loans with shorter terms. For a long time, 30-year fixed rates were higher than adjustable rates. But right now, 30-year fixed rates the better deal.

Your monthly payments will be lower for a 30-year term than for a shorter term, because you're spreading payments out over a longer period of time.

You'll 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 rates work

The 15-year mortgage rates are lower than 30-year mortgage rates. Between the lower rates and paying off the loan in half the time, you'll pay less in the long run on a 15-year mortgage than on a longer term.

However, your monthly payments will be higher on a 15-year loan than on a 30-year loan. You're paying off the same principal amount in a shorter amount of time, so you'll pay more each month.

How 10-year fixed rates work

A 10-year term isn't very common for an initial mortgage. Some lenders do offer 10-year mortgages, but it's more likely you'll refinance into a 10-year term.

Lenders charge similar interest rates on 10-year and 15-year fixed-rate mortgages, but you'll pay off your home earlier with a 10-year mortgage.

How 5/1 ARMs work

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

ARM rates are relatively low right now, but fixed-rate mortgages are still the better deal. The 30-year fixed rates are lower than ARM rates, so it may be a good idea to lock in a low rate with a 30-year or 15-year fixed-rate 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.

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

Refinance rates are at historic lows, so you may want to consider refinancing in the next couple weeks. Starting December 1, most borrowers will pay a 0.5% fee for refinancing. If you lock in a rate before December 1, you don't have to pay the new fee.

But if your finances could use some work, it could still be in your best interest to wait to refinance. A poor credit score or a high debt-to-income ratio will result in a higher interest rate, which could cost you more than the 0.5% closing fee in the long run.

Whether you want to refinance or get an original mortgage, a fixed-rate mortgage is probably the best deal. Fixed rates are at all-time 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 apply for a new mortgage, though. 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:

  • Increase your credit score. A score of at least 700 will help you out — but the higher 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 down debts aggressively or let your credit age.
  • Save more for a down payment. You may be able to place as little as 3% down on a conventional mortgage. But lenders reward larger down payments with lower interest rates, so you may want to save more than the minimum requirement. 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 ratio, 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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