15-Year Fixed Mortgage: Pros and Cons

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 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.

How Mortgage Terms Affect Cost

Due to the inversion, it is actually better value to borrow at longer durations given rates are relatively lower. Hence, all the more reason to lock in a 15-year fixed rate mortgage or 30-year fixed rate mortgage. Ever since I purchased my first property in San Francisco in 2003, I’ve actually preferred adjustable rate mortgages (ARMs). I preferred an ARM over a 30-year fixed mortgage because the interest rate was always lower. But the big benefit of the mortgage fully amortizes across a 15-year duration is that you will likely pay off your mortgage in 15 years, if not sooner. Whereas for folks who take out a 30-year fixed mortgage, there’s a tendency to take the full duration.

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Today’s 15-year fixed mortgage rates start at % (% APR) for a conventional mortgage, according to our daily rate survey. 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. Rate assumes a $300,000 loan amount, 80%LTV with a credit score of 740+. Conversely, if you are planning to live in and/or own the home for a long time, then a fixed rate loan is generally a safer choice, guaranteeing a consistent, fixed payment. Depending on where you are in the home loan process, you’ll probably hear the terms fixed versus adjustable rate at some point.

Pros of refinancing to a 15-year mortgage

It can help you get a better picture of what your monthly costs would be with different combinations of loan types and terms. Get an estimate of your monthly mortgage payment with our mortgage calculator. These rates and APRs are current as of $date and may change at any time.

year home purchase loans

Your monthly mortgage payment will probably be the largest line item in your household budget. Impacting the size of those payments is the sort of mortgage you choose — particularly a 15-year vs. a 30-year mortgage. Deciding between a 15-year refi and increasing payments on your existing loan? You can use our additional mortgage payment calculator to see how extra payments will shorten your pay-off time and lower your interest costs. Instead, use our mortgage payoff calculator to find out what your monthly payment would be on a 15-year term loan and commit to paying that extra amount each month.

• A shocking number of people ask just one lender or broker for a quote when they buy a home or refinance.
• 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.
• Would maxing out both you and your spouse’s 401k and Roth IRA and HSA (assuming your both healthy) be a better investment than saving many thousands of dollars in mortgage interest?
• 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.
• Whether you should wait to buy a house depends on the market and your financial situation.
• Some borrowers opt for the 15-year vs. a 30-year mortgage (a more conventional choice) since it can save them a significant amount of money in the long term.
• One way to look at a 15 year fixed loan is “short term pain for long term gain”.

Government loans

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.

How to Get a Mortgage: A Step-by-Step Guide for Home Buyers

• This is where you need to take advantage of the kink in the mortgage lending curve.
• Get predictable monthly mortgage loan payments with a fixed rate loan for the duration of your mortgage.
• All this means you need to get mortgage rate quotes from multiple lenders.
• Their current mortgage rate is 4% and their monthly mortgage payment for principal and interest is $1,200.
• From 2003 – 2004, the San Francisco real estate market went up about 8%.
• Speak with a qualified lending professional about whether it makes financial sense for you to refinance to a 15 year fixed term mortgage.
• Since you have half the time to pay off the loan, your lender will require more money every month.

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.

How much house can I afford?

• However, $6,905 a month for a 15-year, $1 million mortgage at 3% doesn’t work with my rule.
• In the beginning, because the loan balance is so high, most of the payment is interest.
• You may consider a loan with a 15-year mortgage rate over a longer term loan like a 30-year fixed if you’re comfortable with making higher monthly payments.
• A 15-year mortgage, which is often overlooked by first-time buyers, can significantly impact your long-term financial outcomes and nest egg.
• A 15-year fixed-rate loan is intended for anyone wishing to take advantage of the lowest rates while also enjoying the perks of a fixed monthly payment.
• Back in normal times, a 15-year mortgage generally had an average rate in between a 30-year mortgage and an adjustable rate mortgage with a 1, 3, 5, 7, or 10-year duration.
• The table below is updated as of November 12, 2024 and rates are subject to change.
• The website you are entering is not affiliated with or controlled by the Credit Union and may have different terms, conditions and privacy and security policies than the Credit Union.

MoreYou also agree to our Terms of Use, and to our Privacy Policy regarding the information relating to you. This consent applies even if you are on a corporate, state or national Do Not Call list. If you do choose a 15-year mortgage, you should be confident in your job’s stability. If you took a pay cut, could you still pay the bills and the mortgage? Do you have at least six months of emergency money saved up in case disaster strikes? You should also have enough money to contribute to your 401(k) and retirement IRAs.

How much you could save refinancing to a 15-year 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.

Should you get a 15-year mortgage?

Totally makes sense to go 15 year if one has the means and won’t lose out significantly on cash flow for investing. We may consider a cash out refi or home equity line, but also may just wait until the next home in 3-6 years to have a mortgage. I’m pretty confident the housing market is going to stay strong for years to come. The pace of appreciation will definitely slow, but I’m hard pressed to see negative YoY prices with structurally low supply and structurally high demand. With an ARM, there is almost always a maximum interest rate increase cap for the first year of reset (2% at most usually), and a lifetime cap (3%-4% at most).

What Is a 50-Year Mortgage?

If you currently have a 30-year mortgage and have room in your budget for a higher monthly mortgage payment, refinancing to a 15-year fixed-rate loan can make good financial sense. You’ll still have the stability of knowing that the monthly payment won’t change, while getting the benefit of a lower interest rate. Plus, you’ll pay off your home faster, freeing up money for other financial goals like saving for retirement when you do.

Keep in mind that you need to show the lender that you have enough income to cover a higher payment in order to qualify for the new loan. Mortgage calculators help you get an estimated mortgage rate based on your financial situation. Our friends at Rocket Mortgage® offer a mortgage calculator that can help you determine your monthly mortgage payment and ultimately help you understand how much 15 year mortgage rates today home you can afford. You can input the potential home price, down payment amount or percentage, your loan term, interest rate and ZIP code. You can either choose to input your annual property taxes and annual homeowners insurance or you can have your taxes estimated based on data from your state. A 15 year fixed loan can be a smart choice depending on your current income and future goals.

vs. 30 Year Mortgage Calculator

Compare options to see which lender can offer you the best rate based on your credit score, down payment, and other factors. Interest rates vary depending on the type of mortgage you choose. See the differences and how they can impact your monthly payment. The smaller monthly payments with a 30-year mortgage may give you extra money to sock away in a college account that can grow and earn interest over the years. You can use a mortgage calculator to compare the monthly payments on a 15-year versus a 30-year mortgage.

You can calculate how much you’ll save in interest with a 15-year mortgage and subtract the amount from the fees to determine if refinancing is financially worthwhile. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well.

• An adjustable-rate mortgage might be beneficial if you can get a lower rate and plan to sell or refinance before the rate adjusts.
• Bankrate.com is an independent, advertising-supported publisher and comparison service.
• From a different perspective, you’d pay over $300,000 in interest with a traditional 30-year mortgage.
• Get informed about the mortgage and homebuying process, from starting your home search to planning your next move.
• Shopping around for quotes from multiple lenders is key for every mortgage applicant.
• If you are looking for a good fixed-rate mortgage option, how do you decided between the 30-year mortgage or a 15-year mortgage?
• The amount you can afford to borrow when you apply for a 15-year fixed mortgage depends on a variety of factors.

With a shorter loan period, buyers pay less in overall interest over the life of the loan compared to the 30-year fixed-rate option. However, savvy clients who invest the savings from their 30-year loans back into the market earn a conservative 5% annually, giving them a higher net worth than those who pursue the 15-year option. Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts.

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.

Lower Interest Rate

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.

At some point, you may have so much money that the debt becomes an annoyance and trying to always maximize returns is no longer necessary. Maybe that net worth level is $3 million for some or $20 million for others. Let’s say you bought your second primary residence, a forever home, at age 32.

Whatever it is, there’s always a reason to spend that money somewhere else. But doing that is really no different than choosing a 15-year mortgage in the first place. Besides that, choosing to make those extra payments would be up to you. Not to mention that, as we talked about earlier, the interest rate for a 30-year mortgage is higher than a 15-year mortgage. A shocking number of people ask just one lender or broker for a quote when they buy a home or refinance. The best way to get a great deal is to request quotes from multiple lenders.

The shorter a loan’s term, the less risk it poses to the lender and the lower interest rate they’re typically willing to offer as a result. In fact, though mortgage rates fluctuate, data from Freddie Mac shows a clear pattern of 15-year rates consistently hovering below 30-year rates. Closing costs are fees you pay when finalizing a home-buying or home-refinancing transaction. SECU may assess an origination fee based on your loan amount, which is capped at $2,500, based on your loan type and amount. You must also pay SECU for an appraisal that is completed by a third party. The remainder of the charges, such as title insurance, attorney fees, homeowners insurance, and property taxes, are paid to third parties.

Some borrowers opt for the 15-year vs. a 30-year mortgage (a more conventional choice) since it can save them a significant amount of money in the long term. When mortgage rates decline, more homeowners look to refinance, sometimes to 15-year loans. A 15-year mortgage can set you on the path to build equity faster and pay off your loan sooner, potentially for less interest — but it comes with downsides, as well. Let’s break down whether refinancing to a 15-year mortgage is right for you. Some home buyers start with a 30-year mortgage and later refinance to a 15-year mortgage.

When interest rates drop, astute borrowers will be quick to lock in the lowest fixed rate possible. This way, when market volatility hits and rates rise, the 15-year payment structure protects their minimum monthly payment and offers the most savings long-term. When choosing a term length, think about how much you can afford to pay each month and how quickly you want to pay off your mortgage. If you have a larger monthly budget and want to be able to own your home outright, you might opt for a shorter term. But for many people, keeping their monthly payments as low as possible is the goal, which is why 30-year mortgages are so popular.

My primary home is also full of 4 tenants/roommates and I’m about to refinance. I ideally will keep this property forever and continue to purchase more, hoping eventually to get into multi-family and/or commercial. For those of you who are accredited, also take a look at CrowdStreet. CrowdStreet focuses primarily on real estate opportunities in 18-hour cities.