Right now, a good mortgage rate for a 15-year fixed loan might be in the high-3% or low-4% range, while a good rate for a 30-year mortgage is generally in the high-4% or low-5% range.
From 2017 through 2020, the average ranged from as low as 4.42% to 5.5%. If your interest is around those averages or lower, then it's probably a good rate.
Anything at or below 3% is an excellent mortgage rate. And the lower, your mortgage rate, the more money you can save over the life of the loan.
Just about rate - 3.875% is a fine rate. One could always pay more, perhaps the monthly amount that would have been required for a 15 year mortgage (or more, or less), IF one wishes to pay the mortgage earlier.
However, rates are rising, and rates at or below 4.5 percent are now considered very good. This is still well below the historical average of about 8 percent for a 30-year fixed-rate mortgage.
30-year mortgage rate holds firm
The average 30-year fixed-mortgage rate is 5.75 percent, unchanged since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was higher, at 5.99 percent.
The lowest historical mortgage rates in history for 30-year FRMs were more recent than you might think. December 2020 saw mortgage rates hit 2.68%, according to Freddie Mac, due largely to the effects of COVID-19. The same goes for the lowest average, with an annual rate of 3.11% for 2020.
Higher mortgage rates ahead
Peering ahead to the end of the third quarter of 2022, there likely won't be a drop in rates, in part due to the Fed's efforts to combat inflation.
Definition of Interest Rate
On most home mortgages, the interest payment is calculated monthly. Hence, the rate is divided by 12 before calculating the payment. Consider a 3% rate on a $100,000 loan. In decimals, 3% is . 03, and when divided by 12 it is .
Most homebuyers start their house hunt expecting to negotiate with sellers, but there's another question many never stop to ask: “Can you negotiate mortgage rates with lenders?” The answer is yes — buyers can negotiate better mortgage rates and other fees with banks and mortgage lenders.
Lenders charge higher interest rates when the risk of default increases, which is the case with low down payments. For example, if you make a 3% down payment on a $200,000 loan, you put down just $6,000. But if you make a 20% down payment on a $200,000 loan, you put down $40,000.
Throwing in an extra $500 or $1,000 every month won't necessarily help you pay off your mortgage more quickly. Unless you specify that the additional money you're paying is meant to be applied to your principal balance, the lender may use it to pay down interest for the next scheduled payment.
Save on interest
Since your interest is calculated on your remaining loan balance, making additional principal payments every month will significantly reduce your interest payments over the life of the loan. By paying more principal each month, you incrementally lower the principal balance and interest charged on it.
The closer you get to your term's maturity date, the lower your costs are likely to be. However, should rates continue to rise, locking into a fixed rate sooner may save you more on interest costs in the long run. There is something else to consider: how much and how frequently rates are expected to rise.
The bank makes the assumption that in 2025 and 2026, variable rate loans will cost 4.4 per cent in five years, while fixed rate loans will be slightly higher at 4.5 per cent.
Most households expect the interest rate on a 30-year fixed-rate loan to increase to 6.7% next year and reach 8.2% by 2025, according to a housing survey released by the New York Federal Reserve this week.
Whether or not you qualify for 2.25%, rates are ridiculously low. The truth is, the lowest advertised rates almost always go to top-tier borrowers; those with excellent credit scores and 20% down payments. So a 2.25% mortgage rate will be out of reach for many.
A quick poll on Facebook's RealTown page resulted in several real estate professionals who reported mortgage rates in the 2.8% range. One was even at 2.5%. The best borrowers — ones with high credit scores, little debt, solid equity, and a willingness to shop around — are scoring impressive deals.
As inflation increases, the Fed reacts by applying more aggressive monetary policy, which invariably leads to higher mortgage rates. Experts are forecasting that the 30-year, fixed-mortgage rate will vary from 5% to 7% by the end of 2022.
15-Year Mortgage Rates
Today's rate is higher than the 52-week low of 4.60%. The APR on a 15-year fixed is 5.08%. This time last week, it was 4.98%. At today's interest rate of 5.05%, a 15-year fixed-rate mortgage would cost approximately $537 per month in principal and interest per $100,000.
Paying off your mortgage early is a good way to free up monthly cashflow and pay less in interest. But you'll lose your mortgage interest tax deduction, and you'd probably earn more by investing instead. Before making your decision, consider how you would use the extra money each month.
You should aim to have everything paid off, from student loans to credit card debt, by age 45, O'Leary says. “The reason I say 45 is the turning point, or in your 40s, is because think about a career: Most careers start in early 20s and end in the mid-60s,” O'Leary says.