Today's best mortgage and refinance rates: Sunday, January 17, 2021

Most mortgage rates have decreased since last Sunday; some refinance rates have gone down and others have gone up.

Mortgage and refinance rates remain at historic lows overall, so you may want a fixed-rate mortgage rather than an adjustable-rate mortgage. Mat Ishbia, CEO of United Wholesale Mortgage, told Business Insider ARMs don't have any benefits over fixed-rate mortgages right now.

ARM rates used to start lower than fixed rates, and there was a chance your rate could decrease later. But fixed rates are lower than adjustable rates these days, and they're so low that you probably want to lock in a great rate while you can.

Today's mortgage rates: Sunday, January 17, 2021

Mortgage typeAverage rate todayAverage rate last week
15-year fixed2.36%2.42%
30-year fixed3.14%3.15%
7/1 ARM4.19%4.35%
10/1 ARM3.93%3.74%

Rates from Ad Practitioners LLC.

Since last Sunday, most mortgage rates have decreased. The 10/1 ARM rates have increased, though.

These are the national average rates for conventional mortgages, which are what you probably think of as "regular mortgages." Rates will look slightly different for a government-backed mortgage through the FHA, VA, or USDA.

Mortgage rate are at historic lows overall. Low rates are usually a sign of a struggling economy. Mortgage rates will probably stay low as the US continues to grapple with the COVID-19 pandemic.

Today's refinance rates: Sunday, January 17, 2021

Mortgage typeAverage rate todayAverage rate last week
15-year fixed2.63%2.70%
30-year fixed3.63%3.47%
7/1 ARM4.64%4.87%
10/1 ARM4.35%4.04%

Rates from Ad Practitioners LLC.

Some mortgage refinance rates have gone down since last Sunday, and others have gone up.

How do 15-year fixed mortgage rates work?

With a 15-year fixed mortgage, you'll pay off the mortgage over 15 years and pay the same rate the entire time.

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 mortgage.

How do 30-year fixed mortgage rates work?

With a 30-year fixed-rate mortgage, you pay off your loan over 30 years, and your rate remains the same the entire time.

You'll pay a higher interest rate on a 30-year fixed mortgage than on a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but recently 30-year terms have been the better deal.

Monthly payments are relatively low for a 30-year term, because you're spreading payments out over a longer period of time than you would with a shorter term.

You'll ultimately 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 do adjustable mortgage rates work?

With an ARM, your rate stays the same for the first few years, then changes periodically. Your rate is locked in for the first seven years on a 7/1 ARM, then your rate increases or decreases once per year.

ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. 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 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.

Tips for locking in a low mortgage rate

It could be a good day to lock in a low rate with a fixed-rate mortgage. But if you aren't quite ready to buy a home or refinance, don't worry. Rates will likely stay low for months (if not years) so you probably don't need to rush.

If you want to land the lowest rate possible, consider taking some of the following steps to beef up your finances:

  • Boost your credit score. Make sure you're making all your monthly payments on time, and pay down any debts, if possible.
  • Save more for a down payment. Lenders typically reward a higher down payment with a lower mortgage rate. Because rates should stay low for a while, you may have time to save more before making an offer.
  • Improve your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income — and the lower your ratio, the better. Lenders usually want to see a DTI ratio of 36% or less. To lower your ratio, pay down debts or consider opportunities to increase your income.

But if your finances are already strong, Ishbia said it could be a great time to get a fixed-rate mortgage.

Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews.

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