Today's best mortgage and refinance rates: Thurs, Dec 24, 2020 | Rates stay low...

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Mortgage rates haven't changed since last Thursday, and refinance rates have gone down by just a couple basis points. Overall, rates are still at all-time lows.

Regardless of whether you're getting a new mortgage or refinancing, you may want to choose a fixed-rate mortgage over an adjustable-rate mortgage right now.

Mat Ishbia, CEO of United Wholesale Mortgage, told Business Insider there isn't much of a reason to choose an ARM over a fixed rate these days.

ARM rates used to start lower than fixed rates, and there was a chance your rate could go down later. But fixed rates are lower than ARM rates right now, so you may want to lock in a low rate while you can.

Mortgage rates today: Thursday, December 24, 2020

Rates from the Federal Reserve Bank of St. Louis.

Mortgage rates haven't changed since last Thursday, but they have gone down since November 24.

Mortgage rates are at all-time lows overall. The trend downward becomes more evident when you look at rates from 6 months or a year ago:

Rates from the Federal Reserve Bank of St. Louis.

Lower rates are typically a sign of a struggling economy. As the US economy continues to grapple with the coronavirus pandemic, rates will probably stay low.

Refinance rates today: Thursday, December 24, 2020

Rates from Bankrate.

15- and 10-year refinance rates have gone down by a couple basis points since last Thursday, while 30-year refinance rates have gone up by five basis points. Across the board, refinance rates decreased since this time last month.

How do 30-year fixed mortgage rates work?

With a 30-year fixed mortgage, you'll pay off your loan over 30 years, and your rate stays locked in for the entire time. 

You'll pay a higher interest rate on a 30-year fixed mortgage than on a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but recently 30-year terms have been the better deal.

Monthly payments are relatively low for a 30-year term, because you're spreading payments out over a longer period of time than you would with a shorter term.

You'll ultimately pay more in interest with a 30-year term than you would for a 15-year mortgage, because a) the rate is higher, and b) you'll be paying interest for longer.

How do 15-year fixed mortgage rates work?

With a 15-year fixed mortgage, you'll pay down your loan over 15 years and have the same interest rate the whole time.

A 15-year fixed-rate mortgage is more affordable than a 30-year term in the long run. The 15-year rates are lower, and you'll pay off the loan in half the amount of time.

However, your monthly payments will be higher on a 15-year term than a 30-year term. You're paying off the same loan principal in half the time, so you'll pay more every month.

How do 10-year fixed mortgage rates work?

The 10-year fixed rates are comparable to 15-year fixed rates, but you'll pay off your mortgage five years sooner.

A 10-year term isn't very common for an initial mortgage, but you may refinance into a 10-year mortgage.

How do 5/1 ARMs work?

With an adjustable-rate loan, your rate stays the same for the first few years, then changes periodically. Your rate is locked in for the first five years on a 5/1 ARM, then your rate increases or decreases once per year.

ARM rates are at all-time lows right now, but a fixed-rate mortgage is still the better deal. The 30-year fixed rates are comparable to or lower than ARM rates. It could be in your best interest to lock in a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing later with an ARM.

If you're considering an ARM, you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus adjustable-rate mortgage.

How to get a low mortgage rate

It could be a great time to lock in a low fixed rate, but you don't necessarily have to hurry. Mortgage rates should stay low for months, if not years, so you probably have time to improve your finances. Lenders tend to offer better rates to borrowers with stronger financial profiles.

Here are some tips for landing the best rate possible:

• Boost your credit score. Making all your payments on time is the most important factor in boosting your score, but paying down debts and letting your credit age also help. You may want to request a copy of your credit report to see your score and check for any errors.
• Save more for a down payment. Depending on which type of mortgage you get, you may not even need a down payment. But lenders tend to reward higher down payments with lower interest rates. Because rates should stay low for months (if not years), you likely have time to save more.
• Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Many lenders want to see a DTI ratio of 36% or less, but the lower your ratio, the lower your rate. To improve your ratio, pay down debts or consider opportunities to increase your income.

If your finances are in a good place, you could land a low mortgage rate right now. But if not, you have plenty of time to make improvements to get a better rate.

Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews.