Todays best mortgage and refinance rates: Tues, October 13, 2020 | Rates stay low – Business Insider

Todays best mortgage and refinance rates: Tues, October 13, 2020 | Rates stay low – Business Insider

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The 30-year fixed mortgage rates and 5/1 adjustable rates are down since last Tuesday, and 15-year rates are up. The shifts are relatively minor, though. Refinance rates have increased this time last week, except 15-year rates, which have remained steady.

Rates are at historic lows, so this could be a good day to refinance or get a mortgage. A fixed-rate loan is likely a better deal than an adjustable-rate mortgage right now, though.

Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider that adjustable-rate mortgages are becoming less advantageous 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 solid, then it could be a good time to get a fixed-rate mortgage or refinance.

The best mortgage rates Tuesday, October 13, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 2.87% 2.88% 2.86%
15-year fixed 2.37% 2.36% 2.37%
5/1 ARM 2.89% 2.90% 3.11%

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates have fluctuated by only one basis point since last Tuesday — 30-year fixed rates and 5/1 adjustable rates are down, and 15-year fixed rates are up. 

The 30-year fixed rates have increased since this time last month. The 15-year fixed rates have remained the same, and the 5/1 adjustable rates have decreased.

Mortgage rates are low in general. 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 2.87% 3.33% 3.57%
15-year fixed 2.37% 2.77% 3.05%
5/1 ARM 2.89% 3.40% 3.35%

Rates from the Federal Reserve Bank of St. Louis.

This time last year, average rates were well over 3%. Now rates have been below 3% for weeks.

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 Tuesday, October 13, 2020

Mortgage type Average rate today Average rate last week Average rate last month
30-year fixed 3.19% 3.13% 3.09%
15-year fixed 2.62% 2.62% 2.54%
10-year fixed 2.67% 2.63% 2.61%

Rates from Bankrate.

The 30-year and 10-year refinance rates have risen since last Tuesday, while 15-year rates have held steady. All three refinance rates have gone up since this time last month.

How 30-year fixed rates work

A 30-year fixed mortgage comes with a higher interest rate than a 15-year fixed mortgage. For a long time, 30-year fixed rates were higher than 5/1 adjustable rates. But right now, 30-year fixed rates are lower.

Monthly payments for 30-year terms will be lower than for shorter terms, because you’re spreading payments out over a longer period of time.

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

How 15-year fixed rates work

A 15-year fixed-rate mortgage charges a lower interest rate than a 30-year mortgage. You’ll pay less over time because a) the rate is lower, and b) you’re paying off your mortgage in half the time.

The down side is the higher monthly payments. Because you’re squeezing the same principal into less time, you’ll pay more each month than you would with a 30-year loan.

How 10-year fixed rates work

It isn’t very common to get a 10-year fixed rate on an initial mortgage. But you might refinance into a 10-year mortgage after you’ve paid down some of your loan.

The 10-year fixed rates are comparable to 15-year fixed rates, but you’ll pay off your loan sooner.

How 5/1 ARMs work

While a fixed-rate mortgage locks in your rate for the entire loan term, an adjustable-rate mortgage locks in the rate for the first few years, then changes it periodically. With a 5/1 ARM, your rate stays the same for the first five years, then increases or decreases once per year.

ARM rates are low right now, but you still might want to go with a fixed-rate mortgage instead. 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 with an ARM.

Adjustable rates used to be lower than fixed rates during the introductory rate period, but this is no longer the case. This means ARMs are less beneficial than they used to be.

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 might be a good time to refinance or get a fixed-rate mortgage

This could be a good time to refinance if you have a strong financial profile. Refinance rates have been inching upward over the past few weeks, even if only by a basis point here and there. You may want to refinance while you can lock in as low a rate as possible.

Another reason you may want to refinance now? Starting December 1, 2020, most borrowers will pay a 0.05% fee for refinancing. If you lock in your rate before December 1, then you can avoid paying this closing fee.

But you still might want to hold off on refinancing if your credit score and debt-to-income ratio need improvement. A low credit score or high DTI could lead to a higher interest rate that costs you more than a 0.05% fee in the long run.

It could be a good time to get a fixed-rate mortgage, because fixed mortgage rates are at historic lows right now. 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. Rates will likely stay low well into 2021, if not longer. If you want to snag the lowest rate, consider taking some of the following steps before submitting an application:

  • Increase 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, the better.
  • Save more for a down payment. You may be able to place as little as 3% down for a conventional loan. But the higher your down payment, the lower your rate will likely be. Because rates should stay low for a while, you probably have time to save more.
  • 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. Most lenders want to see a DTI of 36% or less, but an even lower DTI can result in a better rate. Two ways to lower your DTI are to earn more 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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