Anything equal to or less than 3% is an excellent mortgage rate. And the lower your mortgage rate, the more money you can save over the life of the loan. Average mortgage rates are usually about 1.8 percentage points higher than the 10-year promissory note yield. Current homeowners are in a better position to take advantage of these low rates when refinancing their current mortgage.
Comparing the quotes of three to four lenders ensures that you get the most competitive mortgage rate for you. A mortgage discount point typically costs 1% of your loan amount and could reduce your interest rate by up to 0.25 percentage points. However, to get the most accurate quote, you can turn to a mortgage broker or apply for a mortgage through several lenders. You can experiment with a mortgage calculator to find out how much a lower rate or other changes could affect what you pay.
For example, by prepaying 1% of the total interest that will be charged over the life of a loan, borrowers can generally unlock mortgage rates that are approximately 0.25% lower. That said, if you're ready to buy and stay for the long term, these may be some of the best mortgage rates you'll get. If the cost of the interest rate is an important factor for you, you might also want to consider an adjustable-rate mortgage (ARM). A good mortgage rate is one where you can comfortably pay monthly payments and where the other loan details fit your needs.
Some say that refinancing can make sense if it can lower the mortgage rate by as little as 0.5 percentage points (for example, from 3.5% to 3%). They also often include discount points, which lower the mortgage interest rate but increase your upfront charges. Only adjustable-rate mortgages are directly linked to market indices and, therefore, to the Fed benchmark rate. If you're hoping to get the most competitive rate your lender offers, talk to them about what you can do to improve your chances of getting a better rate.
Mortgage rates rose 1.5 percentage points during the first three months of the year, the largest quarterly increase in 28 years. A loan with a lower interest rate may be more expensive than a loan with a higher rate.