Today's mortgage and refinance rates: January 24, 2021 | Rates rise

Mortgage and refinance rates are at historic lows, but they have increased a bit since last Sunday. Still, it could be a good day to lock in a low mortgage rate with a fixed-rate mortgage. You may want to stay away from adjustable-rate mortgages, though.

Adjustable-rate mortgages change your rate after an initial period. Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Insider these mortgages used to work in favor of some borrowers, because adjustable rates would be lower than fixed rates during the intro rate periods.

English said ARMs have become less beneficial for borrowers, though. ARM rates are starting higher than fixed-rate mortgages, and you'd risk your rate increasing down the road. It's safer to lock in a low rate for decades, rather than face higher rates later.

If your finances are stable, it could be a good time to get a fixed-rate mortgage or refinance.

The best mortgage rates on Sunday, January 24, 2021

Mortgage typeAverage rate todayAverage rate last week
15-year fixed2.34%2.30%
30-year fixed3.11%3.04%
7/1 ARM4.01%3.83%
10/1 ARM3.89%3.66%

Rates from Ad Practitioners LLC.

Although mortgage rates remain low overall, they're gone up a little since last Sunday.

These are the national average rates for conventional mortgages, which are what you probably think of as "regular mortgages." You may get lower rates on government-backed mortgages through the FHA, VA, or USDA.

Mortgage rate are at historic lows in general. Low rates typically signal a struggling economy. Mortgage rates will probably stay low as the US continues to grapple with the COVID-19 pandemic.

The best refinance rates on Sunday, January 24, 2021

Mortgage typeAverage rate todayAverage rate last week
15-year fixed2.6%2.56%
30-year fixed3.61%3.6%
7/1 ARM4.5%4.42%
10/1 ARM4.31%4.29%

Rates from Ad Practitioners LLC.

Refinance rates have also gone up since last Sunday. The most significant increase is the 10/1 ARM refinance rate, which is up by 20 basis points.

15-year fixed mortgage rates

With a 15-year fixed mortgage, you'll pay down your loan over 15 years and pay the same rate for the entire life of the loan.

A 15-year mortgage costs less than a 30-year mortgage over the years. Shorter terms come with lower interest rates, and you'll pay off the loan faster.

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

30-year fixed mortgage rates

With a 30-year fixed-rate mortgage, you pay down your loan over 30 years, and your rate is locked in for the entire term.

A 30-year fixed mortgage comes with a higher interest rate than fixed-rate mortgages with shorter terms. For a long time, 30-year fixed rates were higher than adjustable rates. But right now, 30-year fixed rates the better deal.

Your monthly payments will be lower for a 30-year term than for a shorter term, because you're spreading payments out over a longer period of time.

You'll 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.

Adjustable mortgage rates

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

Even though ARM rates are at all-time lows right now, fixed-rate mortgages are still more affordable. The 30-year fixed rates are lower than ARM rates. It could 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.

How to lock in a low mortgage rate

Mortgage rates are at all-time lows, so it could be a good day to lock in a rate.

But don't feel pressured to rush to get a mortgage if you aren't quite ready yet. Rates will likely stay low for months (if not years), so you should have plenty of time. Consider taking some of the following steps to boost your finances and land a better rate:

  • Improve your credit score. Making all your payments on time is the most crucial part of increasing your credit score. You can also pay down debts more aggressively or let your credit age.
  • Save more for a down payment. The minimum amount you'll need for a down payment depends on which type of mortgage you get. But if you can put down more than the minimum, a lender will probably reward you with a lower rate.
  • 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. To improve your ratio, pay down debts or consider opportunities to increase your income.

If your finances are in a strong place, it might be a great time to apply for a mortgage. But if not, you probably have time to make some strides.

Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. Over her four years of covering personal finance, she has written extensively about ways to save, invest, and navigate loans.

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