Today's mortgage and refinance rates: January 21, 2021 | Rates increase

Mortgage and refinance rates have increased since last Thursday, but they're still low overall. It could be a good day to lock in a low rate — but you'll probably want a fixed-rate mortgage, not an adjustable-rate mortgage.

Mat Ishbia, CEO of United Wholesale Mortgage, told Business Insider there isn't much of a reason to choose an ARM over a fixed rate these days.

ARM rates used to start lower than fixed rates, and there was a chance your rate could go down later. But fixed rates are lower than ARM rates right now, so you may want to lock in a low rate while you can.

Today's mortgage rates: Thursday, January 21, 2021

Rates from Ad Practitioners LLC.

Mortgage rates are up since last Thursday, but they remain low overall.

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

In general, mortgage rate are at historic lows. Low rates typically signal a struggling economy. Mortgage rates will probably stay low as the US continues to grapple with the coronavirus pandemic.

Today's refinance rates: Thursday, January 21, 2021

Rates from Ad Practitioners LLC.

Refinance rates have also gone up since last Thursday.

15-year fixed rates

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

Monthly payments are higher on a 15-year mortgage than on a 30-year mortgage. You're paying off the same mortgage principal in half the time, so you'll pay more each month.

But a 15-year mortgage is more affordable than a 30-year mortgage in the long run. Lenders charge lower rates on shorter terms, and you'll own your home 15 years earlier.

30-year fixed rates

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 rate on a 30-year fixed mortgage than on a shorter term, like a 15-year fixed loan. In the past, 30-year fixed mortgages have charged higher rates than adjustable-rate mortgage. But right now, 30-year mortgages are more affordable than adjustable mortgages.

Your monthly payments will be relatively low, because you're spreading payments out over a longer period of time than with a shorter-term loan.

The trade-off is that you'll pay more in interest than you would with a shorter-term mortgage, because a) the rate is higher, and b) the interest is also spread out over a longer amount of time.

Adjustable rates

An adjustable-rate mortgage keeps your rate the same for the first few years, then changes it periodically. For example, a 7/1 ARM locks in your rate for the first seven years, then your rate fluctuates once per year.

ARM rates are at historic lows right now, but a fixed-rate mortgage is still the better deal. 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.

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 that isn't the case right now — fixed mortgage rates are generally 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.

How to get the lowest mortgage rate possible

It could be a great time to lock in a low fixed rate, but you don't necessarily need to rush.

Mortgage and refinance rates should stay low for a long time, so you probably have time to improve your finances. Lenders usually offer better rates to people with stronger financial profiles.

Here are some tips for snagging a low mortgage rate:

• Increase your credit score. Making all your payments on time is the most important factor in boosting your score, but you should also work on paying down debts and letting your credit age. You may want to request a copy of your credit report to review your report for any errors.
• Save more for a down payment. Depending on which type of mortgage you get, you may not even need a down payment to qualify for a loan. But lenders tend to reward higher down payments with lower interest rates. Because rates should stay low for months (if not years), you likely have time to save more.
• Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Many lenders want to see a DTI ratio of 36% or less, but the lower your ratio, the lower your rate. To improve your ratio, pay down debts or consider opportunities to increase your income.

If your finances are in a good place, you could land a low mortgage rate right now. But if not, you have plenty of time to make improvements to get a better rate.

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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