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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If you’re stuck in a 30-year mortgage with high interest rates, the gains you make by refinancing to a 15-year fixed-rate mortgage make it a no-brainer. In case it’s not obvious, we don’t think you should ever get a mortgage term longer than 15 years. But with a 30-year loan, you pay more toward interest annually (and less on the principal) for the first several years of the loan, which means you build equity at a much slower pace.

Consider a 15-year mortgage if you:

Lenders also use the back-end ratio, which is all your debts compared to your income. If you have other significant debts, such as student loans or car loans, your ideal monthly mortgage payment can end up being much lower than 28% of your total income. To determine how much you can borrow with a 15-year mortgage, pay attention to how much you can afford to pay each month. When getting a mortgage, your ideal housing ratio, also known as a front-end debt-to-income ratio, is 28%. With insurance and property taxes included, your housing payments should be within 28% of your total income.

Year Fixed Mortgage Rates

• 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).
• Maybe you’re confident in your job stability and the prospect of an upcoming promotion or two in the next few years.
• If you have a 30-year mortgage and are more than halfway through your loan term, refinancing into a 15-year loan with a lower rate could save you thousands in interest.
• Paying off your mortgage by the time you retire is like a satisfying accomplishment and gift to yourself.

Eligible loan products are Conventional Fixed, Conventional ARM, FHA Fixed and VA Fixed. Program excludes Jumbo, refinance, third-party and in-process loans. Program subject to termination in Pennymac’s sole discretion and without notice. The first thing you should be mindful of with a 15-year mortgage is the higher monthly payments. Since you have half the time to pay off the loan, your lender will require more money every month.

What Is 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.

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One way to look at a 15 year fixed loan is “short term pain for long term gain”. Meaning, you face higher monthly mortgage payments than other longer-term options, but as a result, you will pay down your note much faster. With a fixed rate mortgage, your monthly mortgage payments remain the same throughout the term, which makes budgeting easier as you know exactly how much you will be paying each month. A 15-year mortgage fixed rate may be beneficial for many homeowners compared to other traditional loans, especially a conventional 30-year mortgage.

How a 15-year mortgage stacks up against a 30-year mortgage

From a different perspective, you’d pay over $300,000 in interest with a traditional 30-year mortgage. Instead, a 15-year loan means paying a little more than $100,000 in interest. That’s a notable difference for anyone, regardless of financial situation or goals. But what if you’re more established in your career, have minimal debt balances, and feel confident with your cash reserves? As long as you plan on being in your home for a while, a 15-year mortgage could be more beneficial. Borrowers should also know that a 15-year mortgage typically has a lower interest rate than a 30-year mortgage.

• Don’t default to working with your current mortgage lender; get offers from multiple lenders and compare rates and fees.
• With a predictable and stable payment plan and interest rates, this mortgage loan type is perfect for borrowers who wish to settle their loan faster than a 30-year mortgage.
• Shopping for 15-year refinance rates is similar to the process of finding the best purchase rates.
• The monthly Principal and interest payment is fixed, which helps you set a firm budget.
• Using a mortgage refinance calculator can also help you shop for the best mortgage.
• Plus, you can always sign up for the 30-year mortgage, and then make extra payments to pay off your mortgage early.
• Just like all interest rates, 15-year mortgage rates go up and down most days — sometimes more than once a day.

A 15-Year Mortgage Causes Greater Forced Savings

Checking mortgage rates daily or weekly is a great way to get a feel for the market and what interest rates you’re likely to see when you apply for a home loan. A good source for weekly rates is Freddie Mac’s Primary Mortgage Market Survey, which releases national averages every Thursday and collects historical rates going back to 1971. For daily rates, try the St. Louis Fed, which has both 15- and 30-year rate data. Beginning in late October 2023, 15-year fixed mortgage rates began to decline and, according to the mortgage rates forecast, aren’t expected to rise significantly in the near future.

The current average rate for a 15-year fixed mortgage is 6.47%.

With a 15-year mortgage, your mortgage payments will be higher than the more popular 30-year fixed-rate mortgage due to the shortened loan term. However, your interest rate will typically be lower with a 15-year term compared to a 30-year term, meaning you’ll pay less in interest over the life of the loan. But for a 15-year fixed-rate mortgage with an interest rate of 3.00%, the payment would be about $1,657. The rate and monthly payments displayed in this section are for informational purposes only.

• That might be a good deal for first-time buyers who previously spent about the same amount on rent.
• Pennymac Correspondent Group specializes in the acquisition of newly originated U.S. residential home loans from independent mortgage bankers, banks and credit unions.
• For example, 15-year mortgages have higher monthly payments since you have less time to pay them off.
• 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..
• With a 5.125% rate for the 30-year fixed-rate loan, you would end up paying $412,032 in interest.
• Interest rates and program terms are subject to change without notice.
• The interest rate on a 15-year is so low it’s practically free, or potentially negative in inflation-adjusted terms.

Today’s 15 Year Fixed Mortgage Rates

(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 current interest rates for 15 year mortgage 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.

The 30-year loan would cost $1,432, nearly half the monthly payment of the 15-year loan. While mortgage rates are higher now compared to recent years, 15-year mortgage rates are still lower than those on 30-year loans — though there’s variation from lender to lender. On November 17, 2022, Freddie Mac changed the methodology of the Primary Mortgage Market Survey® (PMMS®). The weekly mortgage rate is now based on applications submitted to Freddie Mac from lenders across the country. But if you decide to take out a mortgage, we recommend getting a 15-year fixed-rate conventional mortgage with at least 10% down (but 20% is better so you can avoid PMI). Just make sure your monthly payment doesn’t go over 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%.

Is it always better to have a shorter mortgage term?

This might not get you to the 15-year mark, but the amount of principal would most certainly go down. A 15-year mortgage has a higher monthly payment than a 30-year one since the loan needs to be paid off in half the time. For example, a 15-year loan for $250,000 at 4% interest has a monthly payment of $1,849 versus $1,194 for the 30-year. In other words, the 15-year monthly payment is 55% higher than the 30-year for the same amount at the same rate.

Check out current rates for a 15-year conventional fixed-rate loan.

An adjustable-rate mortgage (ARM) offers a lower initial rate for a set time. Once the “teaser rate” period ends, your rate will adjust based on the ARM terms you chose, which could cause a big jump in your monthly payment. With a fixed-rate loan, your interest rate and the principal and interest portion of your monthly payments are the same for the loan’s entire term. A mortgage calculator can help you estimate what your monthly payments would be with different loan terms. It even creates a mortgage payment schedule for you, which shows you how much principal and interest you pay every month for each loan term. This will save you a ton of stress in the long run because you’re protected from the risk of rising interest rates.

The rates shown above are the current rates for the purchase of a single-family primary residence based on a 45-day lock period. Your final rate will depend on various factors including loan product, loan size, credit profile, property value, geographic location, occupancy and other factors. I’ve covered the housing market, mortgages and real estate for the past 12 years. At Bankrate, my areas of focus include first-time homebuyers and mortgage rate trends, and I’m especially interested in the housing needs of baby boomers. In the past, I’ve reported on market indicators like home sales and supply, as well as the real estate brokerage business.

Can you get a 15-year fixed-rate mortgage?

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.

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.

Most homebuyers can qualify for a 15-year mortgage, depending on their financial situation and lender criteria. Those with stable income and a solid financial foundation are more likely to secure this loan. Additionally, be prepared for emergencies by keeping three months’ worth of payments — including your mortgage and other debts — in reserve. CNET editors independently choose every product and service we cover.