15 Year Fixed Rate Mortgage Overview
With a 15 Year Fixed Mortgage, You Could Already Be Halfway Home
Unlike a 30 year fixed mortgage, to which it is most often compared, a 15 year fixed mortgage takes half as long to pay off. Instead of making 360 payments as you would with a 30 year fixed, you’ll make just 180 payments over the life of the loan.
A 15 year fixed mortgage will have an interest rate than remains the same during the life of the loan.
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What often matters most to homebuyers who pursue this financial strategy is the satisfaction and safety they feel from knowing that their home is fully paid off.
15 Year Fixed Benefits
Achieves full homeownership faster
Owning a home free and clear is a sign of financial independence. Compared with a 30 year fixed, a 15 year fixed mortgage cuts in half the time it takes to achieve this goal.
Reduces your interest expense
Because lenders are exposed to fewer years of risk on a 15 year fixed, they charge a lower interest rate. And because you're paying interest over half as many years, when compared to a traditional 30 year mortgage, you achieve even more interest savings.
Builds equity faster
With its lower interest rate and slightly higher payment amount than a 30 year, a 15 year fixed mortgage potentially builds equity faster because you’re paying down the principal balance quicker.
Forces you to save
For many homeowners, the mortgage is the first bill they pay each month, so homeowners may pare their spending in other areas. This prioritization, in effect, becomes a forced savings plan.
Use as a retirement tool
If you plan on retiring in under 30 years, paying off your mortgage in 15 years could eliminate your monthly mortgage payment by the time you retire.
15 Year Fixed Requirements
To get a 15 year fixed mortgage, the first step is getting preapproved for the loan. A preapproval can help you:
- Know ahead of time how much home you can afford
- Save time shopping for homes in your range
- Show home sellers and Real Estate Agents that you're a serious buyer
- Speed up the loan closing process and get your loan funded faster
15 Year Fixed Mortgages: What to Watch For
The major factor to be aware of with 15 year fixed mortgages are the higher monthly mortgage payments. For instance, with a 30 year fixed mortgage of $300,000 having an interest rate of 3.75%, if you were to put down 20% of the property’s value, your mortgage payments would total just over $1,100 per month, before taxes and mortgage insurance payments.
A 15 year fixed loan with a 3% interest rate, on the other hand, would have monthly payments of about $1,600. This higher mortgage payment could dramatically impact the original loan amount in the first place.
15 Year Fixed Loan Options
The 15 year fixed is ideal for first-time home buyers, move-up buyers, or for refinancing your current mortgage. Loan options include:
Many home buyers enjoy the advantages and many benefits a 15 year fixed mortgage affords. Ask us today how to get started!
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Who Qualifies for a 15 Year Fixed Rate Mortgage?
The qualifications for a 15-Year Fixed-Rate Mortgage are basically the same as a 30-year mortgage. It depends on the borrower's credit history, income, and more. The main difference is that the monthly payments on a 15-year mortgage will likely be higher than they would be for a 30-year mortgage. As a result, a borrower will be required to have enough income or assets to cover those higher payments each month.
A good place to start is by getting pre-approved for the loan. This allows the borrower to know how much they can afford to spend on a home, speeds up the loan process, and allows sellers to know they are searching with intent.
What are the Benefits of a 15-Year Fixed Rate Mortgage?
15 Year Fixed Rate mortgages offer borrowers a few key benefits, including:
- Full homeownership in as little as 15 years.
- Lower total mortgage interest paid over the life of the loan.
- Build equity faster thanks to higher principal payments.
Are There Any Drawbacks to a 15-Year Mortgage?
Compared to 30-Year Fixed Rate mortgages, 15-Year Fixed Rate mortgages have lower interest rates but higher monthly payments. With higher monthly payments, a borrower may have reduced cash flow to pursue other investments.
Can I Refinance My 15-Year Fixed Mortgage?
Refinancing your 15 Year Fixed Rate mortgage may be possible under the right circumstances, whether you want to refinance to a longer term mortgage to enjoy lower monthly payments, or a shorter term mortgage for lower interest rates.
Is a 15-Year Fixed Rate Mortgage Better than a 30-Year Fixed Rate Mortgage?
Personal circumstances will determine whether longer- or shorter-term conditions are right for you. 15-Year Fixed Rate Mortgages are good for people who can afford higher monthly payments and want to achieve full homeownership faster, but 30-Year Fixed Rate mortgages offer borrowers a chance at homeownership with lower monthly payments but higher interest rates.
Consult our mortgage calculator to simulate the different financial implications of both loans.