If you want to pay off your loan in half the time it takes most homeowners to become mortgage-free, consider a 15-year mortgage. A 15-year fixed-rate mortgage lets homebuyers build equity much more quickly, and both interest rates and total interest costs are usually much lower than with a 30-year loan.
Not everyone will be able to afford a 15-year mortgage, though. This guide will show you your options and help you determine if you can qualify for good loan rates on a 15-year mortgage.
In this guide:
- Average 15-Year Mortgage Rate
- Mortgage Rates Over Time
- Compare 15-Year Mortgage Rates
- What is a 15-Year Fixed-Rate Mortgage?
- Does a 15-Year Mortgage Make Sense for Me?
- 15-Year Mortgage Refinance vs 30-Year
- Where Can I Find the Best 15-Year Mortgage Rates?
Average 15-Year Mortgage Rate
Mortgage rates change over time and vary based on your specific situation. Here is the current average mortgage rate.
|Average 15-Year Mortgage Rate||As of|
Sources: Freddie Mac
Mortgage Rates Over Time
Here’s how mortgage rates have changed over time:
What is a 15-Year Fixed-Rate Mortgage?
A 15-year fixed-rate mortgage is a home loan that’s amortized over 15 years. It’s an alternative to a 10-year or 30-year mortgage loan.
It has the same monthly payment every month, as opposed to an adjustable-rate mortgage, and the principal and interest payments are calculated so that you pay off the loan in full in exactly 15 years.
Does a 15-Year Mortgage Make Sense for Me?
If paying off your mortgage more quickly and getting a lower interest rate is a priority, a 15-year mortgage can make sense. Because of the shorter timeline, rates are lower than on 30-year mortgages, your debt will be subject to interest accrual for less time, and you’ll own your home sooner.
>> Read More: 15-Year vs 30-Year Mortgage
A 15-year mortgage refinance may also be a good option if you want to lower your rates or monthly payments, but don’t want to extend your mortgage for another 30 years.
But you have to make sure payments are affordable. Lenders won’t give you a loan if your total debt payments—including your mortgage, student loan debt, and other payments—are too high in relation to your income.
Typically, lenders want to see a debt-to-income ratio of no more than 43% to approve you for a mortgage.
Since a 15-year mortgage comes with higher monthly payments than a longer loan type, your income will need to be higher or your home cheaper to ensure your payment falls within lender guidelines.
Benefits of 15-Year Fixed-Rate Mortgages
There are some big advantages to 15-year fixed-rate mortgages that can help you decide if one is right for you.
- You’ll make lower monthly payments than on a 10-year mortgage, making the loan more affordable.
- You’ll have lower interest rates and lower total interest costs than a 30-year mortgage.
- You’ll own your home in half the time that you would if you opted for a 30-year mortgage.
Downsides of 15-Year Fixed-Rate Mortgages
You also need to consider the disadvantages of 15-year fixed-rate mortgages.
- Payments will be much higher than on a 30-year loan.
- There’s an opportunity cost—money can’t be invested if you’re making large mortgage payments.
- You may have a harder time qualifying due to a higher debt-to-income ratio thanks to the increased monthly payments.
15-Year Mortgage Refinance vs 30-Year
If you’re considering refinancing your mortgage, choosing the right repayment term can have a major impact on your long-term finances—just as choosing the right mortgage can when you initially buy your home.
Here’s an example of how a 15-year refinance loan stacks up to a 30-year refinance loan in terms of typical rates, monthly payments, and interest costs.
|Loan Amount||Interest Rate||Loan Term (In Months)||Monthly Payment||Total Interest Paid|
As you can see, your monthly mortgage payment on a 15-year mortgage will be much higher, but you’ll save thousands on total interest over the life of the loan.
But because this is just a sample, it’s important that you compare the rates and terms you’re offered when you’re considering buying a house or refinancing a mortgage.
You can use our mortgage calculators to see details about how your loan terms will affect your payments and the total cost of your loan.
- Mortgage Refinance Calculator: How Much Could You Save?
- Mortgage Calculator: Estimate Your Monthly Payment
When evaluating whether a 15-year mortgage loan is affordable, it’s also important to remember that there are other housing costs that you could incur as well. These may include:
- Property taxes
- Private mortgage insurance (PMI)—if you make a down payment of less than 20%
- Closing costs
- HOA fees
- Routine maintenance costs
Where Can I Find the Best 15-Year Mortgage Rates?
Your personal financial situation can have a big impact on the rate you pay, but different lenders will charge different mortgage rates, too.
Factors that could affect your rate include the lender you choose, your credit score, the amount you earn, your debt relative to income, the size of your down payment, and the neighborhood you want to buy in.
You should get quotes from several different mortgage lenders in order to compare their offers. Getting quotes from the best mortgage lenders should help you find a 15-year mortgage at a competitive rate that will let you buy the home you want.
>> Read More: Best Mortgage Rates