Here's a look at today's mortgage and refinance rates for October 1, 2020. This year, mortgage rates have hit record lows nine times. Will rates keep dropping?
It’s been months since coronavirus hit the U.S. — and mortgage and refinance rates are still declining. Mortgage rates are subject to change based on housing market conditions, location, personal finance (such as your credit score), and lender. But if you're looking at U.S. market data as a whole, now is a good time to get a mortgage or a mortgage refinance.
Here's what you need to know about mortgage and refinance rates today, your loan options, and how you can capitalize on lower interest rates and save money.
Today's mortgage and refinance rates
So far, in 2020, mortgage interest rates have plummeted to record lows nine times, and that number is likely to grow. At publication, Freddie Mac reported these average interest rates:
Current mortgage rates, as of October 1, 2020:
- 30-year fixed-rate mortgage: 2.88% (up 0.02% from the record-low rate of 2.86% set on Sept.10)
- 15-year fixed-rate mortgage: 2.36% (a 0.78% decrease from the year prior)
To lock in a low mortgage rate, head to Credible. You can see if you qualify for an instant pre-approval letter without any impact on your credit score. Bonus: You can do it all online.
If you already own a home, then you may instead want to refinance your mortgage. Having a full picture that includes costs and savings can help you decide. You can compare current mortgage refi lenders and save on interest by filling out your information here.
Will mortgage rates keep going down?
In March, the Federal Reserve dropped its interest rate to help protect the U.S. economy against the effects of coronavirus. Mortgage rates could continue to drop as new cases of the coronavirus flare up in communities and as lenders try to encourage more spending.
On September 16, the Federal Reserve voted to leave interest rates between 0% to 0.25% until at least 2023. Further, the Federal Open Market Committee released an updated economic projection sheet that indicates interest rates could remain closer to zero through 2023.
IS NOW A GOOD TIME TO REFINANCE YOUR MORTGAGE?
3 ways take advantage of today's low interest rates
There are several ways you can take advantage of the lower interest rates to save money.
As you consider each option, use Credible to compare mortgages and lenders in one place. Choosing the right lender can help make your experience much more comfortable.
HOW TO GET THE BEST MORTGAGE REFINANCE RATES
Here are a few ways you could take advantage of a rate drop:
- Refinancing your mortgage
- Switching mortgage lenders
- Locking in a low mortgage rate
1. Refinancing your mortgage
If you’re a homeowner, you could save money when you refinance your mortgage. You may be able to reduce your mortgage interest rate with a refinance. Refinancing your loan could save you on your monthly mortgage payment and help reduce the overall cost of your loan.
If you don't know where to start with sizing up today's mortgage rates, turn to a financial website. You can browse the best refinance rates and choose the loan type that fits your needs.
HOW REFINANCING YOUR MORTGAGE CAN PUT MONEY BACK IN YOUR POCKET
If you're considering a mortgage refinance or evaluating loan options, you'll need an online mortgage refinance calculator. Consider the cost of your refinance, the amount you'll save per month, and how long it will take you to recoup the money you put into your refinance. Using a mortgage refinance calculator should tell you if you're saving money by refinancing. (Note: You may have a harder time getting approved for refinance loans with bad credit).
However, it's important to note the Federal Reserve recently announced they’d begin charging a flat 0.5% refinance fee on all refinance loans. The Market Condition Credit Fee was initially slated to begin September 1, but the Fed pushed back the refinance fee start date until December 1. If you refinance a $250,000 mortgage loan, the new fee adds $1,250 to your loan.
In addition to the new Market Condition Credit Fee, refinances also include loan origination fees and closing costs. Ideally, you should aim to reduce your interest rate by at least 1% for refinance loans to pay off.
2. Switching mortgage lenders
You may be able to score a better deal by switching mortgage lenders (especially while interest rates reach record lows). Whether you’re in the process of purchasing a home or already have a home loan, considering a different mortgage lender may be a good option.
- There are multiple reasons to consider a new mortgage lender, including:
- Lower monthly mortgage payments
- Lower interest rates
- Better communication.
If you're a first-time homebuyer, you'll definitely want to check out current mortgage rates and research market data to determine which loan type and lender is right for you. All potential home buyers can benefit from using Credible's tools and reading the latest mortgage news.
HOW REFINANCING YOUR MORTGAGE COULD LEAD TO $50,000 IN SAVINGS
3. Locking in a low mortgage rate
Interest rates change regularly, sometimes daily. If you are getting a mortgage loan, you may want to consider locking in your mortgage rate. When you lock in a mortgage rate, the interest rate cannot change so long as you close your home loan within a set period (typically between 30 and 60 days). While your interest rate cannot go up during a loan lock, it also cannot go down. So, if rates drop further, you could miss out on a lower rate.
Some situations could affect your mortgage rate even after a mortgage rate lock, including a change in your credit score, a change in the loan amount or loan type, or a higher or lower appraisal than expected.
If you’re financially ready, but on the fence about purchasing a home, now is a great time to get serious about buying a property. You could save thousands of dollars by taking advantage of lower interest rates — click here to browse refinance loans or beyond.
SHOULD YOU LOCK OR FLOAT YOUR MORTGAGE RATE TODAY?
For example, if you took out a 30-year fixed-rate home loan at 4% for $300,000, your monthly payment should be about $1,432 per month. The total cost of your loan over 30 years is $515,069 ($215,069) in interest). The same loan with a 2.87% interest rate would have a monthly payment of $1,260 and cost $453,587 ($153,587).
If you can afford it, now is a great time to consider purchasing a home or refinancing your mortgage. Since the new Market Condition Credit Fee won’t apply until December 1, you can maximize your savings by applying for a loan, or a refinance sooner rather than later.
If you have more questions about mortgages or personal finance in general, consider reaching out to a financial advisor — or connect to a loan officer via Credible to get your questions answered.
HOW TO GET PRE-APPROVED FOR A MORTGAGE