Today's mortgage and refinance rates: January 26, 2021 | Rates go up

Mortgage and refinance rates are low overall, but they've gone up a little since last Tuesday.

If you lock in a rate today, then you could end up paying less for a fixed-rate mortgage than for an adjustable rate over the years. Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Insider that typically there's an advantage to an ARM, 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. If your finances are in order, consider refinancing or getting a fixed-rate mortgage soon.

Today's mortgage rates: Tuesday, January 26, 2021

Rates from Ad Practitioners LLC.

Mortgage rates have increased since last Tuesday, but they're still low in general.

We're showing 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.

Overall, mortgage rate are at all-time lows. Low rates typically signal a struggling economy. Mortgage rates will probably stay low as the US continues to grapple with the COVID-19 pandemic.

Today's refinance rates: Tuesday, January 26, 2021

Rates from Ad Practitioners LLC.

Mortgage refinance rates are up since last Tuesday. The 7/1 ARM refinance rate has the biggest increase at 16 basis points.

How do 15-year fixed mortgage rates work?

With a 15-year fixed term, you'll pay down your mortgage over 15 years, and your rate is locked in for the entire time.

A 15-year fixed-rate term is more affordable than a 30-year term in the long run. The 15-year rates are lower, and you'll pay off the mortgage 15 years earlier.

However, you'll pay more each month on a 15-year term than on a longer term. You're paying off the same mortgage principal in half the time, so your monthly payments will be higher.

How do 30-year fixed mortgage rates work?

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

A 30-year fixed-rate mortgage charges a higher interest rate than a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but 30-year terms have become the better deal recently.

You'll pay less each month toward your mortgage than if you chose a shorter term. You're spreading payments out over a longer period of time, so your monthly payments will be lower.

You'll pay more in interest in the long term with a 30-year mortgage 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 ARMs work?

An adjustable-rate mortgage, often referred to as an ARM, keeps your rate the same for the first few years, then changes it periodically. A 7/1 ARM locks in your rate for the first seven years, then your rate will fluctuate once per year.

Although ARM rates are relatively low these days, you still may want to go with a fixed-rate mortgage. The 30-year fixed rates are comparable to or lower than ARM rates, so it could be good to lock in a low rate with a fixed 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 get a low mortgage rate

It could be a great day to lock in a low mortgage rate.

But you don't necessarily need to rush to buy a home or refinance. Rates will likely stay low for months, if not years. 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 ratio is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI ratio of 36% or less, but an even lower ratio can result in a better rate. To improve your ratio, 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.

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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