Today's best mortgage and refinance rates: Monday, November 23, 2020

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Mortgage rates and refinance rates are both down since last Monday. The exception is the 10-year fixed refinance rate, which has remained steady.

Rates are at historic lows overall. You'll probably get a better deal with a fixed-rate mortgage than an adjustable-rate mortgage, though.

Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that adjustable-rate mortgages are less advantageous for borrowers than they used to be. 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 Monday, November 23, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.72%2.84%2.80%
15-year fixed2.28%2.34%2.33%
5/1 ARM2.85%3.11%2.87%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates are lower than they were last Monday, and they're down since this time last month.

Mortgage rates are at historic lows overall. The gradual decrease 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 ago
30-year fixed2.72%3.24%3.66%
15-year fixed2.28%2.70%3.15%
5/1 ARM2.85%3.17%3.39%

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 Monday, November 23, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.99%3.06%3.19%
15-year fixed2.53%2.57%2.63%
10-year fixed2.56%2.56%2.59%

Rates from Bankrate.

The 10-year refinance rates haven't changed since last Monday, but 30-year and 15-year refinance rates have decreased. Refinance rates have also gone down since this time last month.

30-year fixed-rate mortgages

A 30-year fixed mortgage charges a higher rate than a fixed-rate mortgage with a shorter term. For a long time, 30-year fixed rates were also higher than adjustable rates, but 30-year fixed mortgages are actually the better deal right now.

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

You'll make higher monthly payments on a 30-year term than on a shorter term, because you're spreading out payments over a longer period of time.

15-year fixed-rate mortgages

You'll pay a lower rate on a 15-year mortgage than on a 30-year mortgage. Between the lower rates and paying off the loan in a shorter amount of time, you'll pay less on a 15-year mortgage over the years.

Your monthly payments will be higher on a 15-year mortgage than on a 30-year mortgage, though. You're paying off the same principal amount in half the time, so you'll pay more each month.

10-year fixed-rate mortgages

A 10-year term isn't very common for an initial mortgage, but you may refinance into a 10-year fixed mortgage.

The 10-year rates are similar to 15-year rates, but you'll pay off the mortgage five years sooner.

5/1 adjustable-rate mortgages

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.

It may be a good day to buy a home 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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