Finding the best 30-year fixed mortgage rates for your next home loan can save you thousands of dollars over the course of your term. Your interest rate will determine how much you will pay each month and the amount of interest you’ll pay over the life of the loan, so minimizing your interest rate means you can maximize your savings.
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Compare today’s 30-year mortgage rates
According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current refinance average rates for a 30-year, 15-year fixed and 5/1 adjustable-rate mortgage (ARM) refinance rates among others.
Rates data as of 10/19/2020
Best 30-year mortgage lenders in 2020
- WaterMark Home Loans: Best for low-interest rates
- Better Mortgage Corporation: Best for transparency
- Sofi: Best online loan process
- Reali Loans: Best for saving on fees
- Chase: Best for in-person and online service
*The interest rates are based on a 30-year fixed mortgage for a $300,000 single-family primary residence home with a $60,000 down payment for a borrower with a good to excellent credit score.
What is a 30-year mortgage?
A 30-year mortgage is a home loan with a 30-year term and fixed interest rate so payments remain the same throughout the entire life of the loan. The 30-year term offers homeowners lower monthly payment amounts than the other popular mortgage term of 15 years, as the loan amount is spread out over a longer repayment period. You get more home affordability with a 30-year mortgage.
A 30-year fixed mortgage rate often starts out at a higher interest rate than the adjustable rate or 15-year alternatives. Fixed rates never change over the life of the loan while adjustable rates do, often resulting in a fixed-rate loan costing less when comparing the two in the long run. The term of 30 years is also popular because even though it costs the homebuyer more in interest, the monthly payments are cheaper, making homeownership possible.
How 30-year mortgages work
A 30-year fixed mortgage loan gives you 360 total payments made monthly over the 30-year term of the loan. The total cost of your new house is spread out over 30 years of payments, but will end up paying more in interest over the long term. You will also get a higher interest rate with the 30-year mortgage than you would with shorter mortgage terms, like 15- or 10-year mortgage. But if you buy your home in your 20s or 30s, and pay every month on time, you’ll have your home paid off by your 50s or 60s so you can enjoy your retirement without a monthly mortgage payment.
When you choose a 30-year mortgage you can decide between a fixed-rate or an adjustable rate loan. A fixed rate means your interest rate will stay the same no matter what, whether mortgage interest rises or falls. This can save you money if the rate increases, because the fixed rate will always stay the same. However, you can save money if you have an adjustable rate mortgage and the rate decreases. The safer and more secure option is the fixed rate mortgage because we never really know what will happen with mortgage interest rates. Your monthly mortgage payment could skyrocket to a price you can’t pay if the interest rate goes up on your adjustable rate loan. Most people prefer the predictability and stability of a fixed rate loan.
Historical 30-year rates
Freddie Mac shows that historical 30-year mortgage rates have been the lowest they have ever been. The current average 30-year fixed rate mortgage rate is 2.91% (September 2020), which we don’t see in any of the previous months going back to 1972. It is a great time to secure a 30-year fixed rate mortgage for your home before rates increase again. The lower interest rates could be tied to COVID-19 because millions of Americans have been unemployed due to stay at home orders to stop the spread of the virus. Without a stable income, people are wary about buying a new home, notes The Poynter Institute. We might see an increase in the mortgage rates when the majority of Americans start going back to work.
30-year vs. 15-year mortgage
The downside to a 30-year mortgage versus a 15-year mortgage is that you are going to pay more in interest over the term of the loan, thousands more. But a 30-year mortgage is better if you want more home affordability than you would get with a 15-year mortgage. Plus, the monthly mortgage payments will be lower since you’re spreading them out over 360 months versus 180 months.
For example, let’s say you get a $300,000 home loan with a 30-year mortgage and 3.23% interest. You’re going to end up paying a total of $468,838 on that loan. That’s $168,838 in interest alone. That’s over half of the original price! Let’s take that same $300,000 home and finance it with a 15-year loan at 2.86% interest. You’ll pay a total of $369,289, making your total interest cost $69,289. That’s a savings of $99,949 over the term of the loan.
However, the upside to the 30-year mortgage is that your monthly payments with these calculations would be $1,302 versus the much higher 15-year monthly mortgage payment of $2,052. So, if you don’t have a higher income to be able to afford the two thousand dollar plus monthly payments, the 30-year mortgage is a much better alternative.
You’ll also be able to buy a more expensive home with a 30-year mortgage than you would with a 15-year mortgage, since the monthly payments are about twice as much with the 15-year loan. So, while your home affordability might be, for example, $250,000 with a 15-year mortgage, you could get a $450,000 home with a 30-year mortgage.
[Related: 30- or 15-Year Mortgage: Which Is Right for You?]
Pros and cons of a 30-year mortgage
How to find the best 30-year mortgage for you
- Determine how much house you can afford before you do anything else. This will be different for everyone depending on total income, expenses, and debts. However, no one should pay more than 25% of their total monthly income on a mortgage, including you.
- Locate a lender with a low interest rate on 30-year mortgages. A low interest rate isn’t the only reason to choose a certain lender, but it can help you save thousands on your loan over time.
- Figure out your down payment. Save as much as you possibly can for the down payment on your home since it will save you on interest costs later in the loan. Check with the lender’s minimum down payment.
- If you can’t save much for your down payment look for a lender that has a low or zero minimum down payment.
- Check the fees. Mortgage fees can sneak up on you. Fortunately, some mortgage lenders are transparent about their fees or don’t charge any fees. Make sure you ask for a list of mortgage related fees from your loan officer.
- Be prepared for your closing costs. Estimate what yours will be now before you go any further.
- Check out what your lender’s J.D. Power score is so you can find one with excellent customer service. You’ll also want to note when and how you can contact your loan officer.