15-Year Fixed Loan Products

That’s roughly $254 less each month ($3,048 a year) with a longer term. For some families, it makes sense to save the extra money or have it as cash on hand for groceries, emergencies or college savings. On the other hand, some families would rather pay off the mortgage as quickly as possible, and have room in their budgets to do so. In general, you’ll find that fixed mortgage rates are higher than adjustable rate mortgage (ARM) rates. Anyone who wants a variable rate mortgage will have a lower mortgage rate at the beginning of their loan term.

Disadvantages Of A 15-Year Mortgage

• While these mortgage products aren’t as common as their 30-year counterparts are, they are a viable alternative that can offer homeowners several benefits.
• If you’re in your 40s or 50s and buying a home, things get trickier.
• Locking in the shorter duration of a 15-year mortgage now, especially if you’re in your 40s or 50s, potentially allows you to pay it off by the time you plan to stop working.
• I’m a big fan of Sam, but this is one area where he and I definitely disagree.
• Deciding between a 15- or 30-year-mortgage may not seem like something you want to use a lot of mental energy on when everything else is so overwhelming.

Don’t be afraid to walk away from your current lender when you refinance. Consider quotes from both online and traditional brick-and-mortar banks. Alternatively, look into working with a mortgage broker, who will present loan offers from wholesale lenders. Let’s take a closer look at the 15-year fixed-rate mortgage, how it works, and why it’s one of your best options when it comes to buying a house. A mortgage amount of $250,000 over 30 years at a rate of 4% would cost $429,674 in principal and interest payments by the end of the loan, and the total interest would be $179,674.

• This can be appealing to clients who don’t necessarily need to finance a home but prefer to take advantage of the leverage a mortgage provides instead of all-cash offers.
• And if you make a large down payment (industry standards say you should put down at least 20% to avoid paying for private mortgage insurance), you’ll likely end up with a lower mortgage rate.
• Extending your loan term from 15 to 30 years can lower your monthly payment by thousands of dollars which can translate to hundreds of thousands of dollars in purchasing power.
• In this case, our borrower would still be making a higher monthly payment, but not as high as the higher-rate scenario.
• However, most do not because stocks are more volatile and more risky.
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The average 15-year fixed mortgage APR is 6.38%, according to Bankrate’s latest survey of the nation’s largest refinance lenders. If that’s you, refinancing your mortgage is definitely an option to consider. It could be a smart move if it lowers your interest rate or shortens your payment schedule. Home equity is just the difference between what your home is worth and how much you owe on it. The more equity you have, the greater the portion of the home’s current value you actually own.

The 15-year fixed mortgage

Remember, you need to pay closing costs when you refinance your loan. In most cases, the closing costs will be between 2% and 6% of the loan value. Compare the savings made from refinancing the loan versus the closing costs, and then take a call. For decades, we’ve been telling the millions of listeners who tune in to The Ramsey Show the best way to buy a house is with cash. If you’re set on a 15-year mortgage but have a tighter monthly budget, paying down existing debts before you apply for the home loan could help you qualify. A bigger mortgage payment means your home loan will eat up more of your monthly income.

APRs not included. For our most recent APR information, please visit our

Ultimately, 15 year mortgage rates todays can be a great way to build equity faster and lower the long-term cost of borrowing. But home buyers must also consider the higher monthly payments and whether they can afford them. They can help you choose the loan type that best suits your goals and financial situation. If you can comfortably afford the monthly payments on a 15-year fixed-rate mortgage, it’s definitely a good idea. You stand to save tens of thousands of dollars — maybe even hundreds of thousands, with a shorter loan term.But no type of mortgage is a good idea if you cannot comfortably make the monthly payments. Remember, the loan is secured by your home, so falling behind on payments could mean losing your home in a foreclosure.

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Outside the digital world, Marc can be found spinning vinyl, threading reel-to-reel tapes, shooting film with his Bolex and hosting an occasional pub quiz. Katherine Watt is a CNET Money writer focusing on mortgages, home equity and banking. Based in New York, Katherine graduated summa cum laude from Colgate University with a bachelor’s degree in English literature.

Which Is Better, a 30-Year Mortgage or a 15-Year Mortgage?

Always take advantage of a 15-year mortgage when its rate is lower than a shorter duration ARM. However, nobody knows for sure how their other investments will perform. In a bull market, you want to buy the most home you can afford.

Shopping in a low-interest rate market

With the loan repayment period cut in half from a traditional 30-year loan, the monthly payment is significantly higher than the 30-year loan. For many, a home purchase is the single biggest purchase they will make in their life, and for some, that cost burden is best spread out over the longest possible period. By refinancing your 15-year mortgage loan, you’ll also be extending your repayment period by another 180 months.

How our rates are calculated

With good credit and good home equity, you can often get below the average. Therefore, in order to take out a 15-year mortgage, the $240,000 a year household can only borrow $865,000 at 3% for a payment of just under $6,000 a month. Borrowing $135,000 less means coming up with $135,000 more in cash or buying a cheaper home. Even if you took out a 15-year mortgage interest rate that was 2% higher than a 30-year mortgage rate, you would still end up paying $94,349 less in interest during the duration of the loan.

How do I qualify for a 15-year mortgage?

• With interest rates so low, why not lock in a loan for 15 years instead of only five years.
• One should borrow as much as possible for as long as possible and invest elsewhere the extra cash for higher returns.
• A 15-year fixed-rate mortgage works similarly to other types of mortgages.
• A 15-year fixed-rate mortgage is a mortgage loan charging an interest rate that remains the same throughout the 15-year term of the loan.
• And many ARM holders were able to refinance multiple times as well.
• As a borrower, you’ll have to pay a higher mortgage rate for a 30-year fixed versus a 15-year mortgage or an ARM.
• If you’re nearing retirement age, the decisions on what length of mortgage to get become more specific.

Primary home – most people aren’t able to deduct the interest anymore with standard deduction. But it really just depends on the interest rate spread, risk tolerance on cash flow now and in the future, and how aggressive you want to lever up rental properties. My wife and I just paid off most of our debt and she just got a new job with a raise so we’ve been considering a 15 year. I went to check out Credible and they’re not yet available in NY.

There is a higher monthly payment than a 20- or 30-year loan due to a shorter term. But in reality, it’s much harder to qualify for a 15-year loan because of the higher monthly payments. Once a homebuyer accrues 20% equity in their home, they can petition to have this monthly payment removed from their loan, often by ordering an appraisal to confirm the value of their home. Otherwise, mortgage insurance is automatically removed once you accrue 22% equity in your home. “If you don’t expect to be in your home for a long time and believe that rates are going to decline over the next couple of years, then the ARM is a good mortgage product to start with,” Cohn says. “When rates bottom out, refinancing to the security of a fixed rate makes sense if you think you will be in the home long term.”

How much house can I afford?

Now let’s look at a $350,000 house with a 15-year fixed-rate mortgage at 3.5%. With the shorter mortgage, you’ll pay $2,500 a month for a total of $450,000. That’s only $100,000 in interest, significantly less than what you would pay on the 30-year loan. Also note that 15-year fixed-rate mortgages have a lower interest rate than 30-year fixed-rate mortgages.

• Instead of buying a $1,200,000 home with a $1 million mortgage, the household buys a $1,000,000 home with an $800,000 mortgage.
• A major benefit of 15-year mortgages, then, is that the amount of total interest you pay is often a fraction of what you’d pay with an equivalent 30-year loan.
• The rate averages tend to be volatile, and are intended to help consumers identify day-to-day movement.
• To save $46,400 in interest expense with a 15-year mortgage that is 0.5% lower than an ARM, it would take nine years and three months with a $1 million loan.
• This concept scares off many buyers who may be a good candidates for a 15-year mortgage.
• Abby, our online mortgage assistant, can walk you through the process of putting together your application.

If you’d rather talk to a representative right away, you can connect with a loan advisor in your state who can help you review your mortgage options and choose the one that works for you. Whether you’re looking to buy a new house or refinance the home you already have, it’s important to have someone in your corner who can walk you through all your options. Just don’t forget to factor in the closing costs of a mortgage refinance, which can cost 2–6% of the loan amount. The ultimate goal of a refinance is to make a less-than-desirable mortgage better by locking in a 15-year fixed-rate mortgage with a new payment that’s no more than 25% of your take-home pay.

As important as focusing on your mortgage during your working years is, building retirement savings is more important. And, like paying off a mortgage, retirement savings is a long-distance run. For today, Monday, January 06, 2025, the national average 15-year fixed refinance interest rate is 6.33%, down compared to last week’s of 6.34%. The national average 15-year fixed mortgage interest rate is 6.30%, down compared to last week’s of 6.34%. For today, Monday, January 06, 2025, the national average 15-year fixed refinance interest rate is 6.33%, down compared to last week’s rate of 6.34%. The national average 15-year fixed mortgage interest rate is 6.30%, down compared to last week’s rate of 6.34%.

I took out a 5/1 ARam mortgage on my current home when i bought is 5 years ago at 3%. While I considered refinancing, I can’t justify those costs given how low I am. I have the funds to pay of off early, but had wanted to keep cash with hope of property in Florida to make up for/regretting selling in 2016 when my job moved me from there. In the past, I’ve written the best time to buy property is when you can afford it. Shorting the housing market by renting long-term is a tough way to build wealth. Not only was I tempted by my new lower mortgage rate, I simply didn’t pay down extra principal as regularly as I had anticipated.

Should I Wait To Buy A House Or Purchase Now?

• Low 15-year mortgage rates – averaging 3.28% to 3.44% in January 2020 – save money, and buyers interested in paying down principal quickly often can do it without breaking their bank accounts.
• Totally makes sense to go 15 year if one has the means and won’t lose out significantly on cash flow for investing.
• Angela Colley writes about real estate and all things renting and moving for Realtor.com.
• Closing costs are fees you pay when finalizing a home-buying or home-refinancing transaction.

Many borrowers — especially first-time home buyers — simply can’t afford those higher payments, no matter how much it saves them in the end. 15-year fixed-rate loans on average are about 0.5% – 1% lower than 30-year fixed-rate alternatives. This can be appealing to clients who don’t necessarily need to finance a home but prefer to take advantage of the leverage a mortgage provides instead of all-cash offers. You should get rate quotes from multiple mortgage lenders to be sure you’re getting the best rate. Improving your credit score and having a larger down payment will also help.

If I can afford it, should I get a 15-year mortgage?

That said, 15-year mortgage rates tend to hover around 0.5% – 0.75% lower than their 30-year counterparts. For example, 15-year mortgages have higher monthly payments since you have less time to pay them off. However, if you can’t afford the higher monthly payment of a 15-year mortgage don’t feel alone.

The 30-year fixed buyer would have less than $20,000 to play with…factor in costs to sell the home and it might not be enough to buy a replacement home. Taken together, you can save a staggering amount of money simply by going with a 15-year fixed instead of the more commonplace 30-year fixed. Dave Liniger is the co-founder of RE/MAX, the Denver-based global real estate franchise that he co-founded with his wife, Gail, in 1973. Since its founding, RE/MAX has become the leading franchisor of real estate offices throughout the world and has expanded to over 9,000 offices in 110 countries, with 140,000+ sales agents. Dave Liniger is well respected internationally for his vast knowledge of the real estate and franchising industries.

A 15-year fixed-rate mortgage is a home loan that is structured to provide an unchanging interest rate for a shortened period compared to the traditional 30-year fixed-rate option. Investment products and services are offered through Wells Fargo Advisors. We consider a variety of factors when we determine the interest rate and costs of your loan. The process of reviewing these factors to determine your rate is called “risk-based pricing.” Choosing when to lock your interest rate is an important part of the home financing process. During the pandemic, mortgage rates hit historic lows, and 15-year mortgage rates neared 2%.

When that happens, large payments that seemed manageable could end up being a burden. It’s important to make sure you have some type of fund for emergency situations that will help you keep up to date on mortgage payments. If making the larger monthly payments and maintaining an emergency fund are beyond your budget, you may want to opt for a 30-year mortgage. Plus, you can always sign up for the 30-year mortgage, and then make extra payments to pay off your mortgage early. A 15-year fixed-rate mortgage works similarly to other types of mortgages.

A lender could be more or less competitive depending on your credit score, down payment, and other personal factors. In addition, rates can change daily based on the market and a lender’s current workload. If lenders are busy, they might raise rates to deter business. All this means you need to get mortgage rate quotes from multiple lenders. Choosing a 15 year mortgage dramatically cuts your home loan repayment time. A 15 year mortgage minimizes your total borrowing costs and can allow you to eliminate debt quickly.

That said, 15-year loans let you build equity in your home faster and have lower total interest costs because you’re paying interest over a shorter period. You can use our mortgage payment calculator to calculate an estimated monthly payment based on the loan term. Get predictable monthly mortgage loan payments with a fixed rate loan for the duration of your mortgage. Because a 15-year mortgage amortizes over 15 years, a 15-year mortgage will have higher monthly payments than a mortgage that amortizes over a 30-year period. Being able to pay $6,905 a month for a $1 million, 15-year mortgage at 3% requires a much higher income than paying $4,216 a month for a 30-year fixed mortgage. By keeping the 15-year mortgage rate so much lower than other mortgage products, the lenders are willing to give up some margin to secure longer-term profitability in an uncertain future.

After this, your rate will adjust periodically based on current market rates. So with a 5/1 ARM, for example, your mortgage rate will remain fixed for the first five years you have the loan, and then it will change once a year after that. If you can easily afford the monthly payments, want to save on interest and be out from under the burden of debt, the advantages of a 15-year mortgage make it the way to go. The savings are considerable, but only if it doesn’t strain your budget. The decision between a 30-year or 15-year mortgage is one that will impact your finances for decades to come, so be sure to crunch the numbers before deciding which is best. If your aim is to pay off the mortgage sooner and you can afford higher monthly payments, a 15-year loan might be a better choice.

Before you decide to take on a 15 year fixed term mortgage, it is important to assess whether you are able to sustain the higher monthly cost. If you consider yourself someone with a reliable income and self-discipline to commit to a higher monthly payment, then you could be mortgage-free in just fifteen years. LoanDepot can provide you with pricing and amortization schedules for all of our loan terms, so you can make an informed decision.