15-year mortgage rates | Nasdaq


A A 15-year mortgage allows borrowers to finish paying off their home in half the time and at a lower overall cost than a 30-year mortgage. The problem? You will have a higher monthly mortgage payment.

The higher payments mean a 15-year mortgage won’t be affordable for everyone, but it may be the right move for some.

What is a 15-year fixed rate mortgage?

With a 15-year fixed rate mortgage, your interest rate will stay the same for the life of the loan.

One of the main advantages of a 15-year mortgage is that you will likely qualify for a lower rate than a more popular 30-year fixed rate mortgage. A lower rate, combined with a shorter payback period, can save you thousands of dollars in overall borrowing costs.

The Achilles’ heel of 15-year mortgages is that your monthly payments will be higher than on a 30-year loan of the same size. But, if you can afford the monthly expenses, you could get out of debt faster and pay less interest over time.

Click on your state to see average rates by loan type in your state.

The pros and cons of a 15 year mortgage

Mortgages over 15 years versus 30 years

30 year mortgages

A 30-year fixed rate mortgage is the most popular type of home loan in America because the long repayment period results in significantly lower monthly payments. A lower mortgage payment could help you save for other goals, such as home renovations or retirement. However, with a 30-year fixed rate mortgage, you will pay a higher interest rate than a shorter term mortgage.

For example, with a $200,000 30-year mortgage with a fixed rate of 3.5% (roughly the average 30-year rate at the start of 2022), your monthly payment would be $898 and you would pay 123 $311 in interest at the end of your loan term.

15 year mortgages

A 15-year fixed rate mortgage works much like a 30-year fixed rate mortgage. However, since you’re paying off the loan faster, you’ll increase your home’s equity faster and you’ll likely qualify for a lower rate. The downside to a 15-year mortgage is that the payments will be much higher and you may have less leeway to save and make other investments.

If you had a $200,000 15-year mortgage with a fixed rate of 3% (roughly the average 15-year rate at the start of 2022), you would pay $1,381 per month and a total of $48,609 interest over the term of your loan.

That’s $74,702 less total interest than 30 years, but $483 more per month.

15 Year Mortgages vs ARM 5/1

Like 15-year mortgages, 5/1 ARMs (adjustable rate mortgages) initially offer lower interest rates than popular 30-year mortgages. However, 15 and 5/1 ARM work very differently. With a 5/1 ARM, your rate will be fixed for the first five years of the 30-year loan term, but reset each year thereafter.

The initial interest rate may increase significantly after the initial fixed rate period. So if you’re looking for predictable monthly payments, a 15-year fixed rate mortgage would be the obvious choice over a 5/1 ARM. But it’s not a total bet. There are rules that limit the increase and decrease of your rate throughout the life of your ARM 5/1.

Finally, a 5/1 ARM might be worth considering if you plan to live in your home for a short time. For example, if you’re buying from a repairman, the lower payout advantage of a 5/1 ARM might give you some leeway to invest money in renovations. If you time it right, you might switch just before your payments go to the adjustable rate.

15 Year Mortgage FAQs

When is a 15-year mortgage worth it?

If you want to own your home as soon as possible or save on interest payments, a 15-year mortgage may be worthwhile. However, because the repayment term is shorter, your required monthly payments will be significantly larger than those of a loan of the same size over 30 years. This means you need to be sure that you can comfortably afford the highest payments. As a general rule, you should not spend more than 30% of your income on housing costs. If your monthly mortgage payments (plus property taxes, home insurance, home maintenance costs, etc.) fall below this threshold with a 15-year loan, this may make sense to you.

How do I qualify for a 15 year mortgage?

To qualify for most conventional loans (i.e. loans that are not guaranteed by the government), you will need a minimum credit score of 620, a minimum down payment of 3% and a debt-to-income ratio of less than around 36%. Your DTI ratio is made up of all your monthly debt payments, including your new mortgage, divided by your gross monthly income. This number, which lenders use to measure a borrower’s ability to pay the monthly outgoings of a mortgage, is the trickiest measurement for a 15-year-old borrower since the monthly payments are higher. To qualify for a 15-year mortgage, your DTI cannot exceed 50%. Generally, a good debt ratio is below 36%. Reducing a high DTI ratio should be a priority if you’re considering a 15-year mortgage. You can do this by paying off existing debts like student loans, car loans or credit card debt or by increasing your income.

Can I switch from a 30 year mortgage to a 15 year mortgage?

You can go from a 30-year mortgage to a 15-year mortgage with a mortgage refinance. When you refinance, you are essentially replacing your existing mortgage with a new one, with a new term (term) and mortgage rate. This might make sense if you’ve been in your home for a while and can now afford a higher payment. Keep in mind that you will still have to pay closing costs – which average 3% to 6% of the loan amount – and refinancing will restart your loan clock. This means that if you refinance a 15-year loan after paying off your 30-year mortgage for 10 years, your total payback time will be 25 years.

Are there other ways to pay off your mortgage faster?

If you don’t want to incur the higher monthly costs of a 15-year mortgage, you can reduce the time you need to pay off a 30-year mortgage by paying more than necessary. You can do this by paying extra each month or by occasional lump sum payments. A popular strategy is to make payments every two weeks rather than monthly, resulting in an additional payment each year. Any additional payments will also reduce your total interest charges, as they should be used to reduce your loan principal. Most lenders will allow you to make additional payments without a prepayment penalty, but be sure to ask. Also confirm that your additional payments are credited against the principal amount of your loan, not against future interest payments.

Mortgage rate history and trends

What is a good 15-year mortgage interest rate?

Your interest rate will be determined by the economy, as well as a number of individual factors such as your credit score and down payment amount. So what is considered a good mortgage interest rate will vary from borrower to borrower.

For reference, over the decades average mortgage rates have fluctuated. In the 1990s, the average 15-year mortgage rate for the most qualified borrowers was close to 9% — today it is close to 3%.

To get the best rate available, you can work on improving your credit score, raising money for a down payment, or reducing your debt-to-income ratio (DTI). Before choosing a mortgage rate, you should always shop around and compare rates.

Shop around and compare mortgage rates

Determining how much house you can afford is the first step towards home ownership. To compare rates and get a better idea of ​​your budget, experts recommend getting pre-qualified or pre-approved from multiple lenders. Not taking the first rate offered has been shown to save borrowers thousands of dollars over the life of a loan.

If you’re still testing the waters, a prequalification letter can give you an estimate of what a lender would lend you based on self-reported information about your income, credit, and DTI. But if you’re ready to take the plunge, getting a mortgage pre-approval letter can give you a realistic idea of ​​your loan options, interest rates, and home price you can afford.

A pre-approval letter outlines the loan amount you qualify for based on a thorough review of your finances. To get pre-approved for a mortgage, you will need to provide proof of income, credit history, debts, assets, and rental history.

That said, getting pre-approved involves heavy credit application which can lower your credit score by a few points, but there are ways to lessen the impact on your credit. Most credit models consider multiple mortgage applications as one application if made within 14-45 days.

Mortgage pre-approval letters are generally valid for 60-90 days and most are completed within 10 business days. Pre-qualifiers, on the other hand, are ready in minutes.

What makes our data different

Money’s Daily Mortgage Rates show the average rate offered by more than 8,000 lenders across the United States for which the most recent rates are available. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people depositing 20% ​​deposit and include discount points.

Disclaimer: We try to keep our information up to date and accurate. However, interest rates are subject to market fluctuations and vary depending on your qualifications. Calculator results assume a good credit rating and take regional averages into account; your actual interest rate may differ. Calculator results are for educational and informational purposes only and are not guaranteed. You should consult a licensed financial professional before making personal financial decisions.

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