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Home buyers who want a predictable mortgage payment and are eager to pay off their home quickly may be interested in a 15-year fixed-rate mortgage. As the name suggests, this is a mortgage designed to be repaid over just 15 years, or 180 monthly payments.
Fifteen-year mortgage loans tend to offer low interest rates, because such a short loan term means lenders take on less risk. Here are today's 15-year mortgage rates.
A 15-year mortgage is a fixed-rate loan amortized over 15 years. While your monthly payment will never change, the amount that goes toward your principal (the amount you actually borrowed) will increase over time. At the same time, the amount that goes toward interest will decrease.
Fifteen-year mortgage terms are an alternative to the more popular 30-year mortgage. Loans amortized over 15 years come with much lower total interest costs. This is because you pay interest for half the time. Another contributing factor: the annual percentage rate (APR) associated with a shorter loan term is usually lower. But because you're paying off your loan in half the time, monthly payments are much higher.
The good news is that your interest rate and payment will never change during the life of your loan. That’s because 15-year mortgage rates are fixed-rate loans. You'll know up front when you borrow exactly when you'll become debt-free and what your total costs will be.
Fifteen-year mortgages are offered by banks, online lenders, and credit unions. Mortgage brokers (who gather your financial documents and match you with lenders) can also help you apply for one. Rates and lender requirements vary. Borrowers should get quotes from multiple mortgage lenders. As you look, keep an eye out for lenders that allow you to get pre-qualified. This allows you to get a quote without a hard inquiry, which will slightly lower your credit score.
Make sure you're comparing mortgage rates and terms only to other 15-year mortgages. It's important to look at the interest rate, points (prepaid interest), loan origination fees and costs, and qualifying requirements when comparing 15-year mortgage loan rates. Also pay attention to the Annual Percentage Rate (APR) of each loan. This number expresses total annual loan costs factoring in both fees and interest. It can help you to easily see the big picture as you compare one loan to another.
A 15-year mortgage is a good choice for borrowers who want to become debt-free as soon as possible but can't qualify for a 10-year mortgage or want to keep their payments slightly lower.
Home buyers concerned with keeping total interest costs down may also prefer a 15-year loan. This shorter loan can provide significant savings compared with a 30-year fixed rate loan.
Borrowers typically need a relatively high income and low debt to get approved for a 15-year mortgage. Given the higher monthly payments, lenders require a lower debt-to-income ratio. For some borrowers, this can make qualifying difficult.
It's also important to consider the opportunity cost of committing to a larger mortgage payment. This choice could leave you with less money to put toward other goals. For example, the stock market's returns have historically been higher than current mortgage interest rates. Putting off investing in the market in order to pay off your mortgage sooner may ultimately cost you. Some borrowers may prefer a 30-year fixed-rate loan, which they can prepay if they choose but doesn't compel them to make such high payments every month if they don't want to.
A 15-year mortgage is a fixed-rate loan amortized over 15 years.
To find the best rates you shop around to get quotes from multiple mortgage lenders.
A 15-year mortgage may be a good option for you if you want to become debt-free as soon as possible but can't qualify for a 10-year mortgage.
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