There are many factors that can affect your mortgage interest rate, and interest rates are always changing. When starting the process of getting a home loan, it’s important to know what your interest rate could look like based on a number of factors. Some of them are things you can control, while others aren’t.
The mortgage and refinance rates across the United States reached record lows in 2020 and 2021.
It’s important to remember that low mortgage and refinance rates aren’t a guarantee that you’ll get the rate you want. Depending on your credit score, loan type, and down payment, mortgage rates vary from borrower to borrower. Getting quotes from multiple lenders will help you get the best rate.
Mortgages come in a variety of types, depending on their term and interest rate, as well as their length in years. Three main types exist:
- 15-year fixed rate mortgage: This type of mortgage has fixed rates and payments, but it has higher monthly payments due to the 15-year payment schedule.
- 30-year fixed rate mortgage: By spreading out the payment across 30 years, this mortgage offers the lowest monthly payments possible.
- 5/1-year adjustable rate mortgage: This type of mortgage has a fixed rate for the first five years, and an adjustable rate afterward.
There is always flux in mortgage rates, largely due to what’s happening in the economy as a whole. Inflation, bond markets, Federal Reserve policy, and general housing market conditions can all have an impact on the rate you see today.
In 2020, the Coronavirus crisis had a dire economic impact, resulting in a drastic drop in mortgage rates. There were lower interest rates in 2020 and 2021 than at the height of the Great Recession. In January 2021, Freddie Mac reported a low interest rate on thirty-year fixed mortgages of 2.65%.