If you choose a 15-year mortgage to finance your home, the interest rate will be fixed, or unchanged, for the duration of the loan. Although it takes more income to qualify for a 15-year loan than a 20-year or a 30-year mortgage, 15-year mortgage rates are lower (but not as low as rates with a 10-year mortgage). This is because mortgages with shorter-terms pose a lower level of risk to lenders than longer-term mortgages. We researched and compared rates from scores of lenders and these are the best 15-year mortgage rates today.
The Best 15-Year Mortgage Rates Today
Make sure you consider all factors when choosing a mortgage of any length. Although the lower rate and quicker payoff time are enticing, make sure you can afford the higher payment without too much impact on the rest of your day-to-day budget. You can expect your property taxes, insurance, and HOA fees (if applicable) to increase over time. If you’re required to pay PMI because you had a down payment of less than 20%, this cost will eventually go away (once your balance is at 78% of your home’s original value). Your monthly payment will decrease when this happens. To put the payment difference in perspective, let’s assume a $350,000 mortgage carries a rate of 2.210% with a 15-year term versus a rate of 2.847% with a 30-year term. Your monthly payment for principal and interest (P&I) would be about 58% greater ($839) with the 15-year term ($2,286) than with a 30-year term ($1,447). However, you’ll save more than $100,000 in interest if you keep the 15-year mortgage for the entire term, and you’ll pay your loan off 15 years sooner. Research from the National Association of Realtors suggests that the median homeownership duration in the U.S. was 13 years in 2018, but ranged from six to 18 years in the country’s 100 largest metropolitan areas. If you plan to stay in your home on the average to the longer end of this range, your home will be nearly paid off or paid off in full by the time you’re ready to purchase your next home. This means you’ll have built up more equity in your home with a 15-year mortgage and with greater equity, you’ll have greater buying power. You might be able to buy your next home with cash or put down a bigger earnest money deposit. Both of these things can make purchase offers more attractive to sellers, giving you a potential advantage over other buyers. Plus, if you’re able to put down a larger mortgage down payment, lenders might be willing to give you better terms. If qualifying for a 15-year mortgage is important to you and you don’t have a significant cushion in your budget, you can always consider purchasing a less expensive home. Once you’ve owned the home for a few years, then you could sell it and use the equity you’ve built to put toward a larger down payment on a more expensive home. For example, if you planned on getting a $350,000 mortgage, perhaps you could opt for a $250,000 mortgage instead. As shown in the example below, the monthly principal, interest, taxes, and insurance (PITI) payments are about the same between a $350,000 30-year fixed-rate mortgage and a $250,000 15-year fixed-rate mortgage. However, you would have repaid $74,320.87 in principal on the 15-year mortgage at the end of five years versus only $39,702.76 in principal on the 30-year mortgage. This can be an easy way to build equity for your next home purchase. An example of the difference between what you might pay for a 30-year fixed-rate mortgage versus two 15-year fixed-rate mortgage options is shown below:
Interest Rate: The interest rate used in this example is based on U.S. averages and will vary depending on such factors as the type of loan you get (e.g., conventional versus FHA), the lender you choose, and your qualifications (e.g., mortgage rates vary by credit score). Estimated Monthly PITI Payment: This includes principal, interest, taxes, and insurance (property insurance and private mortgage insurance, if your down payment is less than 20%). In our example, this was estimated using a mortgage calculator. It’s important to factor in these costs, as they can make a big difference in your payment and if you’ll be able to qualify for a mortgage. This is because these costs are included in DTI calculations. Debt-to-Income Ratios: In our example, the front-end DTIs with a 30-year fixed-rate mortgage of $350,000 and a 15-year fixed-rate mortgage of $250,000 are similar. This shows that if you want a shorter mortgage term, it’s easier to qualify if you buy a less expensive home. Although the payments are similar, you’ll build up equity quicker with a 15-year mortgage. Assuming home values don’t decrease, you could put this equity toward purchasing a more expensive home in the future.
Using these rates in our example, your monthly payment would be $839 higher (about 58%) for the 15-year mortgage. This can make qualifying for the mortgage more difficult. Yet another difference between a 15-year and 30-year mortgage is how quickly the principal is repaid. As shown in our example, you would have reduced your principal balance by less than $40,000 with a 30-year mortgage at the end of five years. In contrast, you would have paid back over $104,000 in principal with a 15-year mortgage. Since the principal is paid back so much quicker, even if the interest rates were the same, you would pay less interest on the 15-year mortgage than on the 30-year mortgage. This is because the interest calculation is based on the principal balance. So, the smaller the principal balance, the less interest you have to pay. In our example, you would pay $61,531.10 in interest over the entire term of the 15-year mortgage versus $170,880.64 in interest over the entire term of the 30-year mortgage. This is because the monthly payment on a 15-year mortgage is greater than what you would pay for a 30-year mortgage of the same amount. Unless you’ve had your home for many years and have significantly reduced your principal balance, even if you’re able to get a lower interest rate, your monthly payment will most likely increase with a 15-year mortgage over a standard 30-year mortgage. Note that mortgage rates change daily and this data is intended to be for informational purposes only. A person’s personal credit and income profile will be the deciding factors in what loan rates and terms they are able to get. Loan rates do not include amounts for taxes or insurance premiums and individual lender terms will apply.
