Looking for low mortgage rates? Here are some of the loans with the lowest interest rates you'll see, along with why they have the best rates.Verify my mortgage eligibility (Sep 30th, 2022)
Lowest Interest Rate Mortgage #1: 15-Year Fixed Rates
The first type of mortgage that we'll cover is a 15-year fixed rate. Why does it have low mortgage rates? The key is that "15" part. At the time of this writing, the rate according to Zillow is just 2.17%.
When a lender extends a mortgage to you, they're taking on a risk. If you don't pay them back, they have to spend a lot of time and money foreclosing on the home, getting you kicked out, and then selling it to help them get their money back.
Instead of going through that hassle, they'd rather just have someone who pays the mortgage!Verify my mortgage eligibility (Sep 30th, 2022)
By definition, a loan that lasts only 15 years will be paid off in half the time as a 30-year loan. This essentially means you are a lower risk because the window for you to potentially default on the mortgage is much shorter. Because you are a lower risk to the lender, they reward you by extending a lower mortgage rate.
Just keep in mind that having the lowest interest rate mortgage doesn't mean your bill will be low! You will still be paying a much higher monthly premium than a 30-year loan.
Lowest Interest Rate Mortgage #2: Adjustable Rate Mortgages
Have you ever heard of an adjustable-rate mortgage – also called an ARM? You probably have, since they came under fire as contributing to the 2008 Great Recession.Verify my mortgage eligibility (Sep 30th, 2022)
While ARMs aren't perfect, they do have their place. For example, they tend to have lower interest rates than fixed-rate mortgages because the borrower is essentially taking on more potential risk in the future. If rates go up, the rates may climb higher than a fixed-rate mortgage would've been, meaning the lender actually makes more in the long run.
What kind of low mortgage rates can you expect? The lowest is a 3/1 ARM, which currently has a 1.99% rate. The 3/1 means the interest rate will be locked for 3 years, but after that period it can be adjusted per the market rates.
If you lock in a longer period such as a 5/1 or 7/1 ARM, the rates will go up and it won't be as competitive.Verify my mortgage eligibility (Sep 30th, 2022)
Lowest Interest Rate Mortgage #3: Refinancing
The third thing to cover is that the lowest refinance rates can be a bit lower than what you paid when you purchased the home. Generally, these won't be much lower, but it's still worth bringing up. If you are looking to get a 30 year fixed rate loan due to lower payment and a steady interest rate, this is a great option.
If you are a veteran and are eligible for a VA Loan, this can be especially interesting. You have access to what's called an Interest Rate Reduction Refinance Loan – or IRRRL for short. This is arguably the best type of mortgage you can ever get! It's a guaranteed lower rate than when you purchased the home, plus you get the benefits that come with VA loans such as no private mortgage insurance or 20% down payment requirement.
We Can Help
Which lowest interest rate mortgage makes sense for you? Do you want the low rates that come with a 15 year fixed? Are you willing to take on a little extra risk and get an ARM? Or do you already have a mortgage and want to refinance? If you need help deciding, please send us a message. We'd love to help you pick the best type of mortgage for you.Show me today's rates (Sep 30th, 2022)