Today's mortgage and refinance rates: January 29, 2021 | Rates up

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Mortgage and refinance rates have risen since last Friday, though they are still at all-time lows in general. Locking in a low rate on a fixed-rate mortgage today could be a good option if you’re financially able. 

Mat Ishbia, CEO of United Wholesale Mortgage, told Insider you will likely get a better deal on fixed-rate mortgages than adjustable-rate mortgages now.

Fixed rates used to start higher than ARM rates, and there was the chance your ARM rate could decrease in the future. Now, Ishbia said fixed rates are lower than adjustable rates. It’s likely in your best interest to secure a low rate while possible. 

Mortgage rates for Friday, January 29, 2021

Mortgage typeAverage rate todayAverage rate last week
15-year fixed2.28%2.22%
30-year fixed3.03%2.94%
7/1 ARM3.79%3.54%
10/1 ARM3.67%3.43%

Rates from Ad Practitioners LLC.

All mortgage rates have increased since last Friday. However, they are still at historic lows. 

We’re displaying the national average rates for conventional mortgages, which may be what you think of as “normal mortgages.” You may qualify for a lower rate on government-backed mortgages  which have more relaxed eligibility requirements — through the FHA, VA, or USDA.

Compared to past mortgage rates, rates are still at significant lows overall. Often, low rates signify a floundering economy. Mortgage rates will probably stay low as the US continues to face the economic impact of the COVID-19 pandemic. 

Mortgage refinance rates for Friday, January 29, 2021

Mortgage typeAverage rate todayAverage rate last week
15-year fixed2.56%2.52%
30-year fixed3.57%3.56%
7/1 ARM4.16%3.82%
10/1 ARM3.93%3.5%

Rates from Ad Practitioners LLC.

Since last Friday, refinance rates on fixed-rate mortgages have increased slightly, while rates on adjustable-rate mortgages have gone up more substantially. They are still low in general. 

How do 15-year fixed mortgage rates work?

With a 15-year fixed mortgage, you will pay off your mortgage in a decade and a half, and your interest rate will remain locked in for the life of the loan. 

It will cost you less to take out a 15-year mortgage than a 30-year term. The loan will take half as long to pay off, and you’ll get a lower interest rate to boot. 

However, you’ll pay more per month with a 15-year fixed mortgage than with a 30-year mortgage because you’ll pay off the same mortgage principal in half of the time. 

How do 30-year fixed mortgage rates work?

With a 30-year fixed mortgage, it will take you three decades to pay off your loan, and you’ll pay the same interest rate the entire period. 

You’ll pay a higher interest rate on a 30-year term than on a 15-year term. While 30-year fixed mortgages used to have a higher interest rate than adjustable-rate mortgages, you can now get a more favorable arrangement with the 30-year term.

You’ll also pay more in interest with a 30-year fixed mortgage than a 15-year fixed mortgage because you’re paying a higher interest rate for a longer duration of time.

Your mortgage payments will cost less per month with a longer term than a shorter term. You’re spreading out your payments over a longer period of time, so you’ll pay less each month. 

How do ARMs work?

With an adjustable-rate mortgage, your mortgage rate will remain constant for the first several years then will change periodically. A 7/1 ARM locks in your rate for seven years; then, your rate will fluctuate annually. 

Though ARM rates are currently at all-time lows, you might still get the better deal on a fixed-rate mortgage. With a fixed-rate mortgage, you can secure a long-term low rate for 15 or 30 years and not risk a future rate increase with an ARM. 

If you’re considering an ARM, you should take the time to find out from your lender what your individual rates would be if you chose a fixed-rate versus an adjustable-rate mortgage.

How to obtain a low mortgage rate

Today could be a good time to lock in a low mortgage rate — provided you have a good handle on your finances. You can get a historically low rate on fixed-rate mortgages and adjustable-rate mortgages.

There’s no need to rush if you don’t feel ready to get a mortgage or to refinance. Rates will probably remain low throughout 2021, so you have time to get your finances in order. To get the lowest rate possible, consider the following steps: 

  • Increase your credit score. Make your payments on time, pay down your debts, or let your credit age. The higher your score, the lower your interest rate, and a score of at least 700 will probably get you a better rate from many lenders. 
  • Save more for a down payment. You may be able to put down as little as 3% if you want a conventional mortgage, but the minimum requirement will depend on which type of mortgage you want. You can likely get a better interest rate from your lender with a higher down payment. 
  • Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. The better your ratio, the lower your rate may be. Most lenders want to see a DTI ratio of 36% or less, and an even better ratio can result in a lower rate. To better your ratio, pay down debts or seek ways to boost your income. 

Now might be an optimal time to get a fixed-rate mortgage or refinance, depending on your financial situation. If you need more time, rates will likely stay low for a while.

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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