Current mortgage rates range from 3.9% for a 15-year conventional fixed-rate loan to as high as 7.13% for a 10-year home equity loan. Thirty-year fixed-rate mortgages range from 3.39% for FHA loans to 4.14% for jumbo loans. Understanding current mortgage rates helps buyers find the best rate for purchasing their home.
Current Interest Rate for Mortgages
Rate Type & Term
10-Year Home Equity Loan
HELOC (line of credit)
Current Mortgage Rates by Credit Score
The rates listed above are current average mortgage rates, which will vary for individual borrowers based on loan type, lenders, property type, down payment, and your credit score. Borrowers with lower credit scores are perceived as riskier to lenders and therefore pay higher rates than prime borrowers with the highest scores. The table below shows the national current average mortgage rates borrowers could pay based on their credit scores.
Current Average Mortgage Rates by FICO Score
*Rates are based on 30-Year Fixed Rate Mortgage. Source: myFico
Borrowers with FICO scores below 620 might have quite a bit of difficulty getting a mortgage, but it is not impossible. Having a large down payment, a co-signer, or purchasing investment property through a hard money lender are all valid ways to buy a house with a very low score. Interest rates are typically higher in these cases.
Current Average Mortgage Rates Terminology
If you’re new to learning about mortgages and current rates it can sometimes feel overwhelming to decipher and decide which type of mortgage is right for you. From mortgage types, to the difference between APRs and interest rates, it is important to know how mortgages work, to make sure you’re getting the best rates and terms.
The mortgage rates and terms we’ve covered include:
Fixed Rate Mortgages & ARMs
The interest rate type and term show borrowers the length of their mortgage and whether the rate will remain fixed or variable. Fixed mortgage rates stay the same for the duration of the loan. Though there are sometimes shorter terms, fixed-rate mortgages typically are 15, 20, or 30 years long. Some mortgages carry a 40-year term.
ARM or adjustable rate mortgage interest rates change during the term of the mortgage. ARMs are generally amortized for 30 years and typically begin with a fixed rate period of five, seven, or 10 years. After the initial fixed rate period, the interest rate fluctuates for the loan’s duration. For example, after the first decade of a 10/1 ARM, the rate may adjust once annually for the remaining 20 years of the loan. Though the calculations for an ARM can differ, the 2% / 2% / 5% lifetime interest rate increase is typical for most ARMs.
The mortgage type provides information about who backs the loan. For example, conventional mortgages are not secured by government entities like the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), or the U.S. Department of Agriculture. They can be guaranteed through government sponsored agencies like Fannie Mae and Freddie Mac, and made available by some private banks, mortgage lenders, and credit unions.
VA loans are for veterans and their families. FHA loans are typically for borrowers who want the low 3.5% down payment. Borrowers with less than 20% down payment are required to purchase private mortgage insurance (PMI) and pay this fee until the property has 20% equity. Jumbo loans are mortgages that exceed FHA borrowing limits. In 2019, the FHA limit was $484,350. For high cost of living areas, the limit was $726,525.
Jumbo Loan Rates
Rate Type & Term
Interest rates are the price borrowers pay to use a bank’s money to purchase a home. Interest payments are quoted as an annual rate and calculated monthly. On a fixed rate loan, this payment will stay the same over the loan term. As the principal balance declines, the amount of the interest payment decreases and more is applied to the principal, paying it down faster.
To calculate a mortgage interest payment with a 5% interest rate on a $100,000 loan, first divide 0.05 by 12, which is a monthly rate of 0.00416. Multiply 0.00416 by $100,000, to get a monthly interest payment of $416.
0.05 / 12 months = 0.00416 monthly interest rate
0.00416 x 100,000 = $416 monthly interest payment
This is added to the monthly principal payment. Principal is calculated by taking the amount borrowed and dividing it by the term in years, then dividing by 12 months. If borrowing $100,000, divide by 30 to get the annual principal payment of $3,333. Divide by 12 to get the monthly principal payment of $277.77.
$100,000/30 = $3,333 annual principal payment
$3,333/12 = $277.77 monthly principal payment
Once you have the monthly principal payment amount, add the monthly interest payment to get your total monthly payment.
P = $277.77 + i = $416 = $693.77 total monthly fixed rate mortgage payment
Where P is monthly principal and i is monthly interest
Annual Percentage Rate (APR)
The APR, or annual percentage rate is the annual cost of a loan, including fees such as closing costs, PMI, brokerage fees, and discount points. Disclosure of both the interest rate and APR is required by the Truth in Lending Act (TILA). If borrowers pay upfront closing costs the APR will differ from the quoted APR, more closely reflecting the quoted interest rate.
Property Taxes and Homeowner’s Insurance
The APR doesn’t include annual property taxes and homeowner’s insurance, which are either escrowed with the lender and added to the monthly principal and interest payments or paid separately by the borrower. Lenders do not charge interest on or amortize escrowed taxes and insurance.
If borrowers choose to escrow their insurance, they first purchase a 12-month homeowner policy before the closing, then make monthly payments which the lender escrows to cover the following year. Borrowers typically pay property taxes three months ahead at closing, with the annual taxes divided into monthly and added to the loan payment. The lender escrows the collected insurance and taxes and pays these on the borrower’s behalf.
Why Current Mortgage Rates Matter
Understanding the current mortgage rates is very important if you’re considering buying or refinancing a house in the near future. The current average mortgage rates provide a benchmark when shopping for a loan. Lender rates vary, so reviewing both the current interest rates and APRs can show how much the loan will cost. One lender may have a lower rate than another, but a higher APR, indicating that their rates are lower but fees are higher.
If the best rate also carries the highest APR, you can ask the lender which fees are calculated into the APR. If you can pay all or most of those fees out-of-pocket, you may be able to get a great rate. An interest rate that is 1% more than the current average mortgage rates can mean a significantly higher mortgage payment, as low as 10% per month, which can equate to more than $25,000 in extra interest expense over the life of a 30-year, $100,000 fixed-rate loan.
How to Get the Best Mortgage Rate
Buying a home is often the biggest purchase most people make in their lifetime. While mortgage rates are historically lower than other types of borrowing, due to the sizable purchase and length of time to repay the debt, mortgage debt is costly. Therefore, borrowers want to try to get the best possible interest rate to minimize the cost of the mortgage.
Some ways to get the best mortgage rate include:
- Have a large down payment: Having a large down payment of 20% or more reduces a lender’s perceived risk and can reduce a borrower’s interest rate. Borrowers will pay less also since they’re financing less, plus they have instant home equity.
- Have steady employment: Lenders look for at least two years of steady employment in the same or a related field. They want to be sure borrowers have the ability to repay the loan.
- Increase or maintain a high FICO score: If you already have a high score, don’t make any major credit purchases while buying a house. If you need to improve your score, pay off revolving debt.
- Choose a loan with a shorter term: Typically, the shorter the loan term the lower the interest rate. Instead of financing for 30 years, consider a 15- or 20-year mortgage. Not only will the rate be lower, you’ll pay less interest overall.
- Shop for a loan: Compare loans from different lenders and call for estimates. Also consider fees. Mortgage brokers shop loans for borrowers but are paid fees at the closing that get wrapped into the loan.
- Consider an ARM: ARMs start with a fixed rate up to 10 years, then adjust with the market. While the starting rate is often lower than a standard fixed rate loan, the rate will eventually vary. If the loan can be repaid early, borrowers can save big.
- Lock your interest rate: If you are offered a great low rate, you have the option to lock the rate, typically for 90 days. A rate lock can protect you from higher rates, but if rates drop you won’t get the lower rate.
Some rate locks have a one-time float-down. A float-down gives borrowers the option to reduce their interest rate if interest rates drop during their lock term. A float-down protects borrowers from rate increases during the rate lock period, and gives them a one-time option to drop to a lower rate if interest rates fall during the rate lock period.
What Determines a Borrower’s Mortgage Rate
A borrower’s interest rate is determined by many factors, including their FICO score, employment history, down payment, type of financing, and the lender. A borrower’s rate is also impacted by the type of house they’re purchasing. A 30-year fixed rate loan on a primary residence may offer a lower interest rate than a 30-year fixed rate loan on a non-owner-occupied investment property, though many lenders offer the same rate, but expect a higher loan-to-value (LTV).
Factors That Impact Current Mortgage Rates
There are many things which impact current mortgage rates beyond the borrower’s qualifications, the lender, the property type, and location. These are important for borrowers to understand when they’re navigating the home-buying process.
Some things that impact current mortgage rates include:
- The current housing market: When available housing inventory is low, rates often decline because of fewer demands for mortgages. More people renting than owning also impacts rates.
- Inflation: In times of high inflation, interest rates increase. Low inflation brings mortgage rates down to make home buying more affordable.
- Unemployment rates: When unemployment rates are low, interest rates can increase to respond to potential inflation.
- Economic growth: During times of high economic growth, consumer spending and wages are higher, encouraging more people to buy a home. Higher demand for mortgages can lead to higher interest rates.
- The Federal Reserve: The Federal Reserve doesn’t set mortgage rates, but its actions in adjusting the money supply upward or downward impacts current average mortgage rates.
- 10-year Treasury yields: The 10-year Treasury yield is the benchmark that guides fixed and other interest rates, excluding ARMs. As 10-year Treasury yields increase, 10- to 15-year mortgage interest rates also increase.
Rates vs Discount Points
If you’ve shopped for a loan comparing current mortgage rates, you may have heard about discount points. Discount points are upfront fees borrowers can pay to reduce their mortgage interest rate. One point is equal to about 1% of the loan amount. This doesn’t mean your interest rate gets reduced by the same percent as the point. Instead, it usually shaves off one-eighth to one-quarter of a percent per point you pay upfront.
For example, if your loan has a 5% interest rate, and you buy two points, your rate could be 4.5% to 4.75%. If you plan to stay in your home and not refinance, paying points can save a lot of money. It doesn’t make sense to pay points if you plan to move or refinance after a few years.
Alternatives to the Current Mortgage Rates
We’ve discussed the current average mortgage rates for some common types of mortgages. However, there are also other options available if you’re not ready to buy now, have a low credit score, not enough down payment, or if you want to buy rental property. Alternative financing options are available, often with higher-than-average mortgage rates and additional fees, but they can be a great choice.
Some alternatives to the current mortgage rates are:
Investment Property Loans
Investment property loans differ from owner-occupied home mortgages. The current mortgage rates on investment property loans are around 5.25% for premium borrowers, with maximum LTVs on investment properties usually around 75%. Depending on the type of property, private money lenders may place more weight on an investment property’s ability to produce cash flow, rather than the borrower’s personal credit or income. Investment property loans are a great alternative to a traditional mortgage through a bank.
Rent-to-own is when a tenant rents a house with the goal of eventually purchasing the home. A rent-to-own is a “right of first refusal,” meaning the seller agrees to give the tenant the first option to buy the house before other offers are considered. Renting-to-own is a good option when borrowers need time to build their FICO score, save a down payment, or when rates are high but expected to decline.
Purchase prices can also be predetermined in the rent-to-own agreement. Prospective tenants can negotiate all or a portion of their rent payments to be applied to the purchase price. The downside of renting to own is the risk of the current mortgage rates increasing, or the tenant not being ready to purchase when the seller is ready to sell.
Seller financing is when the seller acts as lender. Seller financing is a good option for borrowers who can’t get a loan from a bank and for sellers who want to earn interest income from their property. Seller financing mortgage rates are generally higher than current mortgage rates, but borrowers can negotiate rates and terms. Sellers generally offer financing terms up to 10 years, with five to seven years being the norm.
Crowdfunding is more common for buying and financing investment properties or for a portion of a home purchase for borrowers who don’t qualify for a mortgage. It might be difficult to crowdfund your home since crowdfunders typically offer rewards for contributions. Investors who crowdfund real estate purchases offer equity or income to project investors. Investment property crowdfunding sites connect investors with real estate deals to invest in with as little as $500 down payment.
Tap Into Retirement Savings
Tapping a retirement fund to buy a house should be considered a last resort since you could be charged hefty penalties for early withdrawal. Some borrowers pause retirement contributions to save the money for a down payment to avoid penalties and fees. However, using a self-directed IRA for buying a house can be a good option if you want to buy a home quickly while current mortgage rates are low.
Turnkey Real Estate
Turnkey real estate is rental property that has been fully rehabbed, rented, and managed by a property management company. With companies like Roofstock, you can passively invest in real estate through their Roofstock One program with as little as $5,000 and get fractional ownership of fully rehabbed and rented properties managed directly by Roofstovk.
Pros and Cons of Financing a House
With favorable current mortgage rates, you might be wondering if now is the best time to buy a house. Financing a home purchase and taking on long-term debt is a major life decision and one not to be entered into lightly. Weighing the pros and cons of financing a house can help you decide if now is the right time.
Pros of Financing a House
Some pros for financing a house include:
- Take advantage of current low mortgage rates
- Tie up less of your own money by borrowing
- Deduct up to $750,000 in mortgage interest when you itemize
- Build equity and future value
- Easy repayment terms
Cons of Financing a House
Some cons when financing a house include:
- Lengthy loan terms nearly double the original loan amount in interest payments
- Can be foreclosed on since the debt is secured by the home
- Low liquidity if you need to get your money out
- Long-term commitment
- ARM rate increases can make the home unaffordable
- Repair costs, taxes, insurance, and maintenance costs on top of loan payments
- With less than 20% down payment, you’ll need private mortgage insurance (PMI)
Current Mortgage Rates Frequently Asked Questions (FAQs)
In this article, we have done our best to detail the current average mortgage rates. However, as with any type of financing, some questions are asked more frequently than others, and we have tried to address those here. If we have not answered your question, feel free to share it with us on the Fit Small Business forum and we will provide an answer.
What is a mortgage?
A mortgage is a lien placed on real property as collateral for a loan. A borrower signs a promissory note agreeing to repay the money borrowed to purchase the property. The lender holds title to the property until the debt is repaid. The mortgage includes the amount borrowed, the interest rate, and the loan term.
How does a mortgage work?
When a borrower gets a mortgage to buy a house, he agrees to a loan amount, interest rate, and loan term. The loan is typically repaid in monthly installments, with interest, until the debt is repaid. Each monthly payment is applied to both interest and principal. Mortgage terms can range from 12 months to 40 years.
How long do you repay a mortgage?
Mortgage terms vary but are typically 15, 20, or 30 years. If a borrower gets a 30-year mortgage they are not required to take 30 years repaying it. Most mortgages don’t charge prepayment penalties. Borrowers can significantly shorten the length of their repayment term by making extra payments toward the principal balance of the loan.
When should I refinance my mortgage?
Borrowers refinance for a lower rate, shorter term, to switch from an ARM to a fixed-rate, or to pull cash out of their home’s equity. If a borrower extends the loan term, even at a lower rate, they risk paying more interest over the loan term. It’s ideal to choose a lower rate and term.
Understanding how the current average mortgage rates work can help borrowers choose the best financing for their needs and help them find a great rate. Factors that impact a borrower’s mortgage interest rate include their FICO score, employment history, down payment, and the type of loan they’re applying for. Borrowers can improve their credit scores in a variety of ways to secure a better rate.