Keep in mind, you never want a mortgage with a monthly payment that’s more than 25% of your monthly take-home pay—otherwise, you’d be house poor! That 25% limit includes principal, interest, property taxes, home insurance, private mortgage insurance (PMI), and homeowners association (HOA) fees. One of the reasons as to why you might want to consider refinancing your mortgage to a shorter 15 year fixed is to expedite the goal of paying off your home. Other factors such as an improved credit score could also help you leverage the best rates available. One of the main disadvantages of a shorter mortgage term is an increased monthly mortgage payment.

Comparing the 15-year mortgage to the 30-year mortgage

But this compensation does not influence the information we publish, or the reviews that you see on this site. We do not include the universe of companies or financial offers that may be available to you. I strongly recommend a 15-year fixed mortgage if the payment is affordable, as the significant amount of equity gained per payment is very substantial. Even with higher rates, the mortgage is much shorter, with much less interest, and it’s a great way to tackle equity with every payment made. Our advertisers do not compensate us for favorable reviews or recommendations.

Today’s national 15-year mortgage rate trends

• See competitive mortgage rates from lenders that match your criteria and compare your offers side-by-side.
• A 15-year fixed mortgage is a loan with a repayment period of 15 years and an interest rate that remains the same throughout the life of the loan.
• Imagine you are taking out a $500,000 loan with a 4.5% fixed interest rate for 15 years.
• You can stretch your monthly payments anywhere from 10 to 50 years, but the two most common term options are the 15-year and 30-year fixed-rate mortgages.
• Choosing when to lock your interest rate is an important part of the home financing process.
• Therefore, I would have probably waited at least another year and lost out on a $46,400 paper gain.
• During the pandemic, mortgage rates hit historic lows, and 15-year mortgage rates neared 2%.
• It still makes sense to use a 30-year mortgage for most people.

Then choose a lender, finalize your details, and lock in your rate. For the week of January 5th, top offers on Bankrate are X% lower than the national average.On a $340, year loan, this translates to $XXX in annual savings. If you itemize your tax deductions, you may be able to write off the mortgage interest paid on your 15-year mortgage, your property taxes, and any private mortgage insurance (PMI). Keep in mind that you may also need to pay closing costs and get a home appraisal to refinance.

How to compare current 15-year mortgage rates

In the long term, 15-year loans can lower your total interest costs and get you out of debt faster. In the short term, however, you’ll face higher monthly payments and less flexibility. One way young homebuyers can break this cycle is by choosing a 15-year mortgage over a 30-year term.

Less Affordability

The better your financial situation is, the lower your rate will be. By the end of your term with the 30-year loan, you’ll have paid more than $300,000 in interest. If you have a lot of working years ahead of you, things to keep in mind are what kind of income increases you expect over the years and whether you have an inheritance or other windfall coming.

• Many people experience a wake-up call around age 50, realizing they should have started saving earlier.
• They don’t think much about whether they could afford a higher monthly payment and, in turn, own their home faster.
• It’s harder to qualify for a 15-year mortgage because a lender needs to determine you can afford the higher monthly payments on your current budget.
• These savings can be better utilized in other areas of your life, such as retirement savings, education or medical needs, or home improvement goals.
• Anyone who wants a variable rate mortgage will have a lower mortgage rate at the beginning of their loan term.
• There are many different kinds of mortgages that homeowners can decide on which will have varying interest rates and monthly payments.
• That’s fine, since it will take a large expense out of your budget at a time you’ll be taking on another big expense.
• Keep in mind that rates have shifted dramatically over the past few years.

Who may benefit from a 15 year fixed rate mortgage vs. a different term?

It would make up for some of the savings by not getting a 15-year mortgage. Personally, I like investing in commercial real estate through a diversified fund like the ones from Fundrise. Commercial real estate is the asset class I think has the most amount of upside as the economy opens up. Fundrise manages over $3 billion and has over 350,000 clients. However, $6,905 a month for a 15-year, $1 million mortgage at 3% doesn’t work with my rule. In a permanently low interest rate environment, when an ARM resets, there’s a good chance it resets to a similar rate or even to a lower rate.

What Is a 15-Year Fixed Mortgage Rate?

If you’re expecting a sizeable inheritance or other windfall before the mortgage is paid off, there are benefits to a 15-year mortgage, but the 30-year mortgage also may not be a bad option. By contrast, buyers pay mostly interest each month during the early years of a 30-year loan, giving them little to show for the property if they decide to sell it. If you’re 10 or 20 years from retirement age and buying a house, the decision is even more crucial. Imagine, then, a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years.

Knowing what type of loan is best for you is important.

This is the tradeoff between 15-year mortgage rates and 30-year rates. But if you have plenty of monthly cash flow, this might be the right loan type for you. LoanDepot’s easy-to-use calculator puts you in charge of estimating your mortgage payment.

Mortgage calculator

Perhaps you can obtain a 15-year loan with a 4% interest rate. While your monthly payments will be quite a bit higher, you’ll also own your residence in half the time. A 15-year fixed rate mortgage in the UK is a type of mortgage loan in which the interest rate remains fixed for the entire 15-year term of the loan. These mortgages are less common in the UK compared to other countries like the US, where they are quite popular.

See our other fixed interest rates by loan type

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• On paper, it’s no harder to qualify for a 15-year mortgage loan than a 30-year one.
• The national average 15-year fixed refinance interest rate is 6.33%, down compared to last week’s rate of 6.34%.
• Since short-term loans are less risky and cheaper for banks to fund than long-term loans, a 15-year mortgage typically comes with a lower interest rate.
• Typically, homeowners refinance to a 15-year fixed mortgage to save on interest and pay off the loan faster.
• 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.

My work has been recognized by the National Association of Real Estate Editors. The problem is that many, many Americans simply can’t afford the higher monthly 15 year fixed mortgage rates payments tied to a 15-year fixed mortgage, for better or worse. The mortgage costs less than various other mortgage options throughout the loan’s life.

• It could even be hundreds of thousands of dollars, depending on where you live and your loan amount.
• While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service.
• In addition, if you take out a 15-year mortgage, a greater percentage of your payment will go towards paying down principal.
• As we make the mortgage payment and stash cash, we will pay the mortgage off once the two hit the inflection point.
• Commercial real estate is the asset class I think has the most amount of upside as the economy opens up.
• Because you’re paying off a 15-year mortgage faster, you’ll also gain equity in the home sooner than you would with a 30-year loan.

With this option, the total amount you pay over the life of the loan will usually be higher. This 15- vs. 30-year mortgage calculator can help you determine which option is right for you. If you already have a 30-year fixed-rate mortgage and are interested in refinancing to a 15-year mortgage, there are a couple key points to keep in mind.

Get connected to a licensed loan officer that can walk you through the process. Unlock the potential of your home with our comprehensive guide to home equity. Learn how to calculate your home equity & how to leverage it for financial gain. You could retire early, buy a second home, or even start your own business. What may seem like impossible dreams suddenly become attainable when you free up such a large percentage of your income.

Current 15-Year Mortgage Rates

Evaluate your financial situation carefully and consult a mortgage expert to determine if this option aligns with your goals. My plan (hope) is to continue to dedicate my paycheck from my day job to maximizing my Simple IRA, paying cash for kids college so that they start life debt free, continue to invest and enjoy life. My wife is a teacher and we allocate a portion of her paycheck to covering utilities each month. She enjoys the remainder of her paycheck to do with, whatever she pleases. By the way, she is at 19+ years of a year goal of Public Employee Retirement Account (PERA) Pension. We actually elected to get a new construction home recently under contract for fall close and have opted to pay in cash.

Though we can’t review every available financial company or offer, we strive to make comprehensive, rigorous comparisons in order to highlight the best of them. For many of these products and services, we earn a commission. The compensation we receive may impact how products and links appear on our site. It’s a good reminder that the average rate for various mortgages are just that, averages.

After 180 monthly payments, your mortgage is paid in full, and you own your home free and clear. As you weigh your mortgage options, it’s important to understand how getting a 15-year home loan will affect your monthly payments and how much you end up paying for your home over the long run. It’s also important to understand how a fixed interest rate differs from an adjustable rate. Get all the details on a 15-year fixed mortgage so you can determine if it’s the right option for you. The main drawback of a 15-year mortgage is that you’ll have higher monthly payments, and you’re locked into them.

Greg McBride is a CFA charterholder with more than a quarter-century of experience in personal finance, including consumer lending prior to coming to Bankrate. Through Bankrate.com’s Money Makeover series, he helped consumers plan for retirement, manage debt and develop appropriate investment allocations. Before joining Bankrate in 2020, I spent more than 20 years writing about real estate and the economy for the Palm Beach Post and the South Florida Business Journal. I’ve had a front-row seat for two housing booms and a housing bust. I’ve twice won gold awards from the National Association of Real Estate Editors, and since 2017 I’ve served on the nonprofit’s board of directors. Discover the details about what credit score you’ll need for a mortgage.

For example, if you earn $5,500 a month and have $500 in existing debt payments, your monthly mortgage payment should not exceed $1,480. This particular mortgage type has a fixed interest rate at the time of closing. The monthly Principal and interest payment is fixed, which helps you set a firm budget.

I’d highly recommend any readers seize this opportunity now if they have the cash flow to cover the payment. The interest rate on a 15-year is so low it’s practically free, or potentially negative in inflation-adjusted terms. Rentals I think make more sense to stick with a 30 year because the interest expense is a good tax and you can improve your cash flow to buy more rentals and lower DTI calc as well.

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.”

For buyers looking to maximize their purchasing power, we often recommend the 30-year term. 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. Yes, 15-year mortgages come with larger monthly payments, which can potentially put a strain on borrowers’ budgets and limit how much they can afford to borrow. The main benefits of getting a 15-year mortgage are a lower interest rate, less interest paid overall, and building equity faster.

If saving is too difficult with a 15-year mortgage, consider taking a 30-year mortgage and paying more than the required monthly payment when you can. Since monthly payments on a 15-year mortgage will be higher, you won’t have as much wiggle room and you might not be able to save as much. However, after 15 years you won’t have any mortgage payments, freeing up capital to invest and spend freely. With a longer term of 30-years, you spend a long time paying down mortgage interest before you make a meaningful dent in your loan principal. With a shorter-term loan, you’ll start to pay down the loan balance and build equity a lot faster.

• Select both the 30-year and 15-year loan terms in turn to make your comparison.
• But the trade-off is that you’ll have a larger monthly payment due to the shorter term.
• By contrast, buyers pay mostly interest each month during the early years of a 30-year loan, giving them little to show for the property if they decide to sell it.
• I suppose one can refi and take money out of property again if needed but that itself comes with additional cost.
• I just locked in 1.875% with -$2968 in fees (a credit) on 15 year on my main this AM (currently have a 5 yr ARM at 2.44%).
• While it could make sense for you specifically, this loan option might not suit every prospective buyer.

Was trying ot hedge inflation by locking in a 30 yr fixed at low rate. Other wild card is selected 3 points fee to buy down rate to 2.5%. Plan to own for 10 years, so the buy down is worth it if we keep for 7 years and don’t pay off early.. Taking out a 15-year mortgage or refinancing into a 15-year mortgage makes a lot of sense. However, a 15-year mortgage is only great if you can afford it. Fannie Mae and the other government-backed enterprises charge what they call loan-level price adjustments that often apply only to, or are higher for, 30-year-mortgages.

Let a Pennymac loan expert uncover the best mortgage rate and savings tailored to you, so you can achieve your aspirations of home. Compare the interest rate of the current mortgage and that of the 15-year fixed mortgage. Your interest rate remains constant throughout the loan term, protecting you from potential rate increases and making budgeting easier. With a 15-year mortgage, you build home equity faster than with a 30-year mortgage. This allows you to utilize the equity for home improvements or other financial needs sooner.

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.

Interest rates and program terms are subject to change without notice. Average mortgage rates are lower on 15-year mortgages compared to loans with longer terms. You’ll also pay less interest because the term is shorter, so you’ll spend less time accruing interest. If you want to move in the next few years, you might prefer a different term. A 15-year fixed mortgage helps you save money on interest over the long term, which means it’s a good deal if you’re looking to keep your overall costs down. But these mortgages aren’t for everyone, especially if you’re looking to keep your monthly payment as low as possible.