Today's best mortgage and refinance rates: Monday, November 2, 2020

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The 30-year fixed mortgage rates and 5/1 adjustable rates have gone up since last Monday, and 15-year fixed rates have gone down. Refinance rates vary: Some have decreased, while others have done the opposite.

It could be the right time to lock in a low rate — but you'll likely want to get a fixed-rate mortgage rather than an adjustable-rate mortgage.

Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Business Insider there's usually an advantage to an adjustable-rate mortgage, in which the rate fluctuates after an initial period. That advantage is usually a lower rate for the fixed period.

However, he points out that ARMs don't currently follow that pattern. Fixed rates are currently better than adjustable rates, because lenders want to keep customers banking with them for as long as possible. Even though the 30-year fixed rate and 5/1 adjustable rate are about the same right now, 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, consider refinancing or getting a fixed-rate mortgage soon.

The best mortgage rates Monday, November 2, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed2.81%2.80%2.88%
15-year fixed2.32%2.33%2.36%
5/1 ARM2.88%2.87%2.90%

Rates from the Federal Reserve Bank of St. Louis.

The 30-year fixed mortgage rates and 5/1 adjustable rates have increased since last Monday, and 15-year fixed rates have decreased — but all the changes are just by one basis point. Mortgages rates have gone down across the board since the beginning of October.

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 typeAverage rate todayAverage rate 6 months agoAverage rate 1 year ago
30-year fixed2.81%3.23%3.78%
15-year fixed2.32%2.77%3.19%
5/1 ARM2.88%3.14%3.43%

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 Monday, November 2, 2020

Mortgage typeAverage rate todayAverage rate last weekAverage rate last month
30-year fixed3.12%3.23%3.08%
15-year fixed2.73%2.65%2.61%
10-year fixed2.58%2.60%2.61%

Rates from Bankrate.

The 30-year refinance rates have gone down since last Monday, while 15-year and 10-year rates have held steady. The 30-year and 15-year refinance rates have increased since this time last month, and 10-year rates have decreased.

How 30-year fixed rates work

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

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

You'll pay more in interest in the long term with a 30-year term than you would for a shorter term, 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

You might get a 10-year term for an original mortgage, but it's more likely you'll refinance into a 10-year term.

The 10-year rates are comparable to 15-year rates, but you'll pay off the loan sooner.

How 5/1 adjustable rates work

With an adjustable-rate mortgage, your interest rate stays the same for the first few years, then changes periodically. For instance, a 5/1 ARM locks in your rate for the first five years, then your rate will increase or decrease once per year.

ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. You could lock in a super low rate for the entire life of your loan rather than risk your rate increasing down the road.

You used to be able to get a lower rate during the intro rate period with an ARM than with a fixed-rate mortgage. But right now, fixed rates are lower.

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.

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

If your finances are in a good place, you may want to consider refinancing sooner rather than later. Starting December 1, most borrowers will pay a 0.5% fee for refinancing. You can avoid paying this fee by locking in a rate before December 1.

But you still might be better off waiting to refinance if your finances need a boost. A low 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% fee in the long run.

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 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 your score, the lower 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 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 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 DTI, 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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