What Is a 15-Year Fixed Mortgage Rate? Assurance Financial

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.

How to find the best 15-year mortgage rates

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.

Features of SECU Fixed Rate Loans

Run the numbers to decide whether the flexibility will be worth it, since 30-year loans often come with higher interest rates. To get your monthly payments under the desired percentage of your income, you may need to either pay off some debts before applying for your mortgage or find a way to increase your earnings. 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. Like other types of mortgages, you use a 15-year, fixed-rate mortgage to buy property. Many people obtain a mortgage to buy their primary residence, while others obtain a mortgage to buy a vacation home or property to rent out to others. A 15-year fixed-rate loan makes sense if you can commit to a higher payment for the term of the loan.

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

The longer the term, the higher the risk that the loan won’t be repaid. If you want to lower the cost of homeownership, you can start by finding a way to lower your mortgage rate. The higher your mortgage rate, the more interest you’ll pay over the life of your home loan. That’s why it’s important to compare mortgage rates before committing to working with a specific lender.

Understanding the differences between fixed and adjustable-rate mortgages

A 15-year mortgage could allow you to pay off your mortgage before you retire. On the other hand, some people in retirement rely on the mortgage interest tax deduction, and that’s not available once the mortgage is paid off. Lower interest rates and quicker payoff time make 15-year mortgages an attractive option. For some experts, being able to afford the higher payment includes having a rainy day fund tucked away.

Down Payment Options for a 15-Year Fixed-Rate Mortgage

By opting in for a shorter mortgage term, you will pay down substantially more principal in fewer years, thus building equity at a much faster rate. Private mortgage insurance is required for all conventional loans with a down payment of less than 20%. Borrowers can opt to pay this monthly (most popular), in a lump sum at closing, or finance the lump sum into the loan. The cost for PMI varies depending on credit score, down payment, and loan term.

Year Fixed Rate Mortgages

And if you’re someone with a high net worth and you’ve taken out a mortgage loan with a value above $750,000, you can’t qualify for the mortgage interest deduction either. Despite the interest saved with a 15-year mortgage, borrowers should think about a few considerations and disadvantages before deciding on the term of their loan. For today, Monday, January 06, 2025, the national average 15-year fixed mortgage interest rate is 6.30%, down compared to last week’s of 6.34%. The national average 15-year fixed refinance interest rate is 6.33%, down compared to last week’s of 6.34%.

A 15-Year Mortgage Borrower Pays Less In Total Interest

You’re technically saving on interest in the short and long term. Again, you’re able to keep more of your money with this particular loan program. You don’t want that thing weighing down your budget for the rest of your life. Knock it out in 15 years or less so you can move on to building extraordinary wealth and living and giving like nobody else.

Today’s 15-year refinance rates

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.

See our other fixed interest rates by loan type

So I’ll be visiting the credit union I work for to get a 1% employee discount on the mortgage rate. For an investor beginning to get into real estate, it is best to have more cash reserves, so I would opt for the 30 year. You’ll need the cash for down payments and to cover expenses when things don’t go according to plan (tenant not paying rent, unexpected major repairs, etc.). Once you don’t have a mortgage, life gets much more affordable.

What Is a 15-Year Mortgage?

It also requires the discipline to systematically invest the equivalent of those monthly differentials and the time to focus on the investments, which, he adds, most people lack. When mortgage rates are low, a savvy and disciplined investor could opt for the 30-year loan and place the difference between the 15-year and 30-year payments in higher-yielding securities. A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But the shorter term makes the loan cheaper on several fronts. In fact, over the full life of a loan, a 30-year mortgage will end up costing more than double the 15-year option. The 15 Year Mortgage Rate is the fixed interest rate that US home-buyers would pay if they were to take out a loan lasting 15 years.

This could help reduce the loan term and interest rate but also increase your monthly payments. These fees typically apply to borrowers with lower credit scores who make down payments less than 20%. Private mortgage insurance (PMI) is required by lenders when you make a down payment that’s smaller than 20% of the home’s value. A 15 year fixed year mortgage is a loan that will be completely paid off in 15 years assuming all payments are on schedule. As the name implies, this type of mortgage has a fixed rate, which keeps the payment and interest rate the same for as long as you hold the mortgage.

By getting a 15-year fixed-rate mortgage, you’ll be taking on a loan with a smaller mortgage rate compared its 30-year fixed counterpart. You’ll also be paying off your mortgage and building home equity at a faster rate. When 15-year fixed mortgage rates are low, owning a home seems more affordable. As rates fall, the demand for housing generally rises and so do home prices. That year, the average annual rate on 15-year fixed mortgages was 6.03%. As the country plunged into another recession, mortgage rates continued to fall.

• The above example is for illustration purposes only and uses the following scenario to compare a 15-year fixed and a 30-year fixed rate loan.
• Choosing between a 15- and 30-year mortgage depends on your personal goals and your financial situation.
• By refinancing an existing loan, the total finance charges incurred may be higher over the life of the loan.
• I’ve already gone through the initial applications with 2 lenders to lock in 15 year at 2.00% with no points and minimal closing costs (just about $1K).
• These rates are based on a $250,000 loan up to the maximum term length for a single family home.2 Payments represent principal and interest only; taxes and insurance are not included.

Weekly national mortgage interest rate trends

You plan on buying a house in the near future, and you know you’ll need a mortgage to do so. Mortgages vary in term length, type of interest rate and the amount of interest charged. Check out our mortgage calculator to find out how much of your monthly mortgage payment is going to principal and interest. With a 15-year fixed-rate mortgage loan, you repay the principal and interest each month through your monthly payment.

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.

• Owning a home may feel like it simply provides one of your basic needs.
• However, the household needs to be damn sure about its income-generating future and ability to hold on during bad times.
• Only if you want to stay in the house for some time then refinance your loan.
• For instance, a 15-year FHA loan will likely require a credit score of at least 580, down payment of 3.5%, and debt-to-income ratio below 50%, just like a 30-year FHA mortgage.
• If I was forced to take out a 15-year mortgage back in 2003, I likely would not have bought the condo when I did.

Not many people are disciplined to pay down extra principal when they have extra cash. You can take out a 20- or 30-year loan and make additional principal payments at your convenience to get the advantages 15 year fixed mortgage rates of a shorter-term without locking yourself into the higher payments. The key is that you are free to make extra payments when you want to, rather than being locked in as you would with a 15-year loan.

Choose Your Debt Amount

A key factor when choosing between the two is knowing how long you expect to live in your home. If you only plan to stay in the home for a short time before selling, then an adjustable rate loan could be your best option. The teaser interest rate in an ARM is lower than a fixed rate for a few years. However, keep in mind that if rates rise at the end of your introductory period you risk a rate adjustment, which could result in a payment increase in the future.

The changes are based on many different economic indicators in the financial markets. See how much you could qualify to borrow and what your estimated rate and payment would be. It takes just a few minutes and won’t affect your credit score. You might like a 15-year fixed mortgage if you plan to stay in your home for a long time and want to be aggressive about paying off your mortgage. “Yes, your rate will be lower on a 15-year, however, the 30-year gives you more flexibility if you are ever tight on cash,” says Paul Gabrail, host and founder of the YouTube channel Everything Money. “Remember, you can always pay down extra on a 30-year mortgage if you choose.”

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.

• Talk to the RamseyTrusted® home loan specialists at Churchill Mortgage about getting a 15-year mortgage that fits your budget so you can pay off your home fast.
• But, it also makes some assumptions about mortgage insurance and other costs, which can be significant.
• A 15-year mortgage is a loan for buying a home whereby the interest rate and monthly payment are fixed throughout the life of the loan, which is 15 years.
• Best case is to use the bank’s money for real estate and then your capital in stocks or other higher yielding investments.
• As the example below shows, in the current rates environment you could save over $47,500 in interest just by going with a 15-year loan instead of a 30-year loan.
• However, some lenders do offer fixed rate mortgages for 15 years—we just couldn’t find any from the major lenders at this time.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. A higher cash reserve means less money going towards saving for retirement. A $240,000 a year household can afford to buy up to a $720,000 home. If the household wants to stretch the multiple from 3X to 5X given rates are so low, the household can afford to buy up to a $1,200,000 home.

The lower monthly payment of a 30-year loan, on the other hand, may allow you to buy more house or free up funds for other financial goals. When deciding between a 30-year and a 15-year mortgage, consider your circumstances. Do you need the flexibility of smaller payments, such as what you’d get with a 30-year loan? Or are you focused on the bottom line, and the interest savings you could get with a 15-year loan? Can you afford to make bigger monthly payments, or do you need room in your budget for other goals?

Since a 15-year mortgage amortizes over 15 years instead of 30 years, you will pay less total interest if both mortgage rates are the same. However, the average 15-year mortgage rate is much lower than the average 30-year mortgage rate. Therefore, the combination of a lower rate and shorter amortization period results in much less in total interest payments by the borrower.

The mortgage payment on the 15-year fixed from our example above is around $600 higher, even when factoring in a lower mortgage rate. I’ve already written at length about the pros and cons of a 15-year fixed mortgage, but some financial experts claim you shouldn’t even buy a home if you can’t afford this shorter-term mortgage option. When shopping for a new home, it’s wise to invest as much time in exploring mortgage options as you do in finding the right property.

Lenders decided they couldn’t make enough margin on a 5/1 ARM with a 30-year amortizing period to warrant the increased risk of defaults. Below is a graphic of the Treasury yield curve that demonstrates higher rates with longer durations. But notice how the yields for 2-year, 5-year, 7-year-, 10-year, 15-year are all lower than the yields for 1-month, 6-month, and 1-year Treasury bonds.

(This is an option with most every lender, but contact yours to confirm.) You’ll pay less interest and shorten the pay off time while still keeping some wiggle room. Should a financial emergency arise, you can revert to your original, lower payment amount for that month, or as long as you need to, without incurring any penalties. Shopping around for quotes from multiple lenders is key for every mortgage applicant. When you shop, consider not just the interest rate you’re being quoted, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate.

While we adhere to strict editorial integrity, this post may contain references to products from our partners. Whether you should wait to buy a house depends on the market and your financial situation. When interest rates are low, you can potentially save money by locking in a low rate. That’s not to say a 15-year fixed won’t save you a ton of money, or that it’s perhaps a cool rule of thumb when setting out to buy a home. At the same time, it’s also perfectly acceptable to just stick with a 30-year fixed the whole way because it’s often a very cheap debt. The argument is essentially that the 30-year fixed mortgage is a bad deal for homeowners and should be avoided at all costs.

If your budget is tight, you might have to lower your price range to find a home you can afford with a 15-year loan. The lowest average 15-year mortgage rate ever recorded was in mid-2021, when it fell to 2.10%, according to Freddie Mac. Debt.org wants to help those in debt understand their finances and equip themselves with the tools to manage debt.