Mortgage rates are determined based on your credit and personal financial situation, as well as on economic factors. Rates constantly change but the good news for homebuyers is they’ve been near record lows for weeks. Here are today’s mortgage rates for Aug. 12, 2020. Because these rates are very affordable, now could be a good time to lock in yours.
6 Simple Tips to Secure a 1.75% Mortgage Rate
Secure access to The Ascent’s free guide that reveals how to get the lowest mortgage rate for your new home purchase or when refinancing. Rates are still at multi-decade lows so take action today to avoid missing out.
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30-year mortgage rates
Rates for a 30-year mortgage remain below 3.00% for another day, which is an unbelievably low rate. Locking in at this rate will enable you to benefit from some of the lowest interest costs in decades as your interest rate and payment will remain the same for the life of the loan. On a $200,000 mortgage, an interest rate of 2.998% would give you a monthly payment of just $843 per month and total mortgage costs of $303,477. This includes both principal and interest — taxes and insurance would be charged separately.
20-year mortgage rates
Interest rates on a 20-year fixed rate mortgage are also very competitive, coming in at 3.020% for August 12. A $200,000 loan at this rate would result in a higher monthly payment of $1,111 but you’d pay off your home a decade earlier and total costs of your loan would be just $266,688 (not including taxes and insurance) so you’d save over $36,000 in interest compared with the 30-year loan. This savings comes from the fact you pay interest for far less time, although your rate is slightly higher.
15-year mortgage rates
A 15-year fixed rate mortgage has an average interest rate of just 2.571% today, which is an extremely low rate and one that provides significant savings over the 30-year loan option. Locking in at this low rate is well worth it. On a $200,000 loan at an interest rate of 2.571%, you’d be looking at a monthly payment of $1,340 but total loan costs of just $241,249. However, while you would be debt-free in half the time and pay significantly less interest than with a 30-year loan, many people prefer the flexibility provided by lower monthly payments and a longer loan term.
Finally, the average interest rate on a 5/1 ARM is 3.198%. An adjustable-rate mortgage means that your rates are tied to a financial index and can change. Your 3.198% rate would be locked in only for the first five years (which is why this is called a 5/1 ARM) and could subsequently change each year. Because the average interest rate on a 30-year fixed rate loan is below the rate on an ARM, there’s little reason to take the risk of your rate adjusting upward when you could instead lock in today’s record low rates for the life of your loan.
Should I lock in a mortgage right now?
A mortgage rate lock guarantees you a specific rate for a preset period of time — usually 30 days, but you may be able to lock in your rate for up to 60 days. You’ll generally pay a fee for a mortgage rate lock, but in exchange, you’re protected in the event that there’s a substantial jump in rates between now and your loan closing date.
If you plan to close on your home within the next month, then it could pay to lock in your rate based on how today’s numbers look, and also based on recent rate fluctuations. Today’s rates are actually quite competitive across the board, so no matter what loan term you’re interested in, you have a chance to lock in a good deal.
However, if your closing is more than a month away, you may want to choose a floating rate lock instead for what will generally be a higher fee, but a potentially worthwhile one. A floating rate lock allows you to snag a lower rate on your mortgage if rates fall prior to your closing, and given the way rates have moved in recent weeks, there’s a chance they could still go lower in time.
- LOCK if closing in 7 days
- LOCK if closing in 15 days
- LOCK if closing in 30 days
- FLOAT if closing in 45 days
- FLOAT if closing in 60 days
No matter what decision you make, aim to get offers from different mortgage lenders to increase your chances of securing the most favorable rate. Each lender sets its own requirements with regard to factors like your credit score, so it pays to get offers you can compare.
View more information: https://www.fool.com/the-ascent/mortgages/articles/current-mortgage-rates-august-12-2020/