Today's mortgage and refinance rates: January 27, 2021 | Slight rate increases

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Mortgage and refinance rates have gone up slightly since last Wednesday, but are still at all-time lows in general. If your finances are in order, today might be a good day to lock in a low rate with a fixed-rate mortgage.  

Mat Ishbia, CEO of United Wholesale Mortgage, told Insider fixed-rate mortgages are currently a better deal than adjustable-rate mortgages.  

In the past, ARM rates started lower than fixed rates, with the possibility that your rate could decrease later. But Ishbia said now fixed rates are lower than ARM rates, so it's in your best interest to secure a low rate while possible.

Mortgage rates on Wednesday, January 27, 2020

Rates from Ad Practitioners LLC.

While a majority of mortgage rates have increased since last Wednesday, they are largely still low.  

Remember that we're supplying you with the national average rates for conventional mortgages, which may be what you consider "normal mortgages." You might qualify for lower rates on government-backed mortgages through the FHA, VA, or USDA.   

As a whole, mortgage rates are at notable lows. Low rates are often a signal of a faltering economy. Mortgage rates will likely stay low as the US continues to struggle with the economic impact of the COVID-19 pandemic.

Refinance rates on Wednesday, January 27, 2020

Rates from Ad Practitioners LLC.

Since last Wednesday, 30-year fixed and 10/1 adjustable mortgage refinance rates are marginally lower. By contrast, 15-year fixed refinance rates and 7/1 ARM rates have increased. 

15-year fixed mortgage rates

With a 15-year fixed mortgage, you'll pay a locked-in interest rate over the duration of a 15-year loan period.  

Compared to a mortgage with a longer term, a 15-year mortgage is less expensive. It will take half the time to pay off the loan, and you'll pay a lower interest rate. Importantly, a 15-year mortgage comes with higher monthly payments than a 30-year mortgage. It will cost you more each month because you're paying off the same loan principal in half of the time.

30-year fixed mortgage rates

With a 30-year fixed mortgage, you'll pay down your loan over 30 years at a constant rate.

A 30-year fixed mortgage comes with a higher interest rate than a 15-year mortgage. You used to pay a higher rate for 30-year fixed mortgages than for adjustable rates, but now 30-year rates are the preferential option.  

You'll pay more in interest with a 30-year mortgage than a 15-year term because the interest rate is higher and you're paying that rate for longer. 

On the bright side, because you're spreading your payments out over a longer period, you'll pay less per month with a 30-year term than a shorter term.

Adjustable mortgage rates

While a fixed-rate mortgage locks in your interest rate for the duration of your mortgage, with an adjustable-rate mortgage, your rate is the same for the first several years, then changes at regular intervals. 

A 7/1 ARM locks in your rate for seven years, then increases or decreases your rate annually. A 10/1 ARM sets your rate for a decade, then your rate will change once per year.

While ARM rates are at all-time lows right now, a fixed-rate mortgage is still the best bet. It might be in your favor to secure a low rate with a 30-year or 15-year term instead of risking an increased rate in the future with an ARM. 

If you're thinking about getting an ARM, you should take the time to ask your lender about what your individual rates would be if you chose a fixed-rate versus an adjustable-rate mortgage.

Best ways to secure a low mortgage rate 

Now might be a good time to lock in a low mortgage rate, as both fixed-rate and adjustable-rate mortgages are at all-time lows. 

However, there's no need to rush to apply for a new mortgage or to refinance. Rates will probably stay low well into 2021, if not longer, so you have time to improve your financial standing and obtain a better rate. To get the lowest possible rate, take these steps into consideration before you apply:  

• Increase your credit score. Ensure that you make all your payments on time — this is the most important way to improve your credit score. You may also consider paying down more debts or letting your credit age. 
• Save more for a down payment. You might need between 0% and 20% for a down payment, depending on which type of mortgage you want. However, the higher a down payment you can make, the better your interest rate is likely to be. As rates will probably stay low for a while, you still have time to save up. 
• 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. To better your ratio, pay down debts or seek ways to boost your income. 

If you're feeling confident about your financial situation, now might be a good time to take out a mortgage or refinance.

Ryan Wangman is a reviews fellow at Personal Finance Insider reporting on mortgages, refinancing, bank accounts, and bank reviews. In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership.   

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