|FHA 30-Year Fixed||3.04%||3.19%|
|VA 30-Year Fixed||3.07%||3.31%|
|Jumbo 30-Year Fixed||3.32%||3.50%|
|Jumbo 15-Year Fixed||3.01%||3.19%|
|Jumbo 7/1 ARM||2.35%||2.63%|
|Jumbo 7/6 ARM||2.53%||2.73%|
|Jumbo 5/1 ARM||2.19%||2.47%|
|Jumbo 5/6 ARM||2.56%||2.66%|
Frequently Asked Questions
What Is a 15-Year Mortgage?
A 15-year mortgage is a fixed-rate loan for the purposes of purchasing a home. The monthly payment, which includes the principal and interest, remains the same throughout the lifetime of the mortgage which is 15 years.
Who Should Consider a 15-Year Mortgage?
Homeowners who want to save significantly on their home loan and can afford to pay the higher monthly mortgage payments are best suited for 15-year mortgages. That’s because these types of loans tend to have lower interest rates—government-supported agencies like Fannie Mae and Freddie Mac tend to impose loan-level price adjustments, which drive up the costs of 30-year mortgages.
Borrowers considering 15-year mortgages need to consider whether they can afford the monthly payments, as they will be higher compared to a 30-year or 20-year mortgage because you are paying the loan off in less time. It’s critical that you determine whether you have ample savings set aside and room in your budget to afford the higher payments in addition to your other monthly obligations.
Does the Federal Reserve Decide Mortgage Rates?
It’s a common misconception that the Federal Reserve decides traditional mortgage rates. While it doesn’t directly do so, the Federal Reserve influences lenders to either raise or lower their rates.
How it works is that the Federal Reserve (more specifically, the Federal Open Market Committee) determines the federal funds rate that impacts adjustable and short-term interest rates in order to ensure the stability of the economy. Both these rates are the ones in which financial institutions like banks lend money to each other in order to meet the mandated reserve levels. That means when rates go up, it’s more expensive for financial institutions to borrow from other financial institutions.
It’s because of these higher costs that interest rates tend to go up since they’ll be passed onto the consumer when it comes to loans such as mortgages. Other factors that also influence rates include individual factors such as a borrower’s assets, liabilities, credit, and debts.
What Is a Good 15-Year Mortgage Rate?
A good rate will depend on your credit profile and other financial considerations. Lenders want to see that you can pay your mortgage on time consistently and look at your financial situation such as whether you have ample assets, a steady income, and not too much debt that you’ll be struggling with mortgage payments.
They’ll also look at your credit score—the higher yours is, the more likely you’ll be seen as a low-risk borrower which equates to lower interest rates. On the other hand, the lower your credit score, the more likely lenders see you as higher risk, meaning you’ll be offered rates higher than the average rate mentioned above.
What Are the Differences Between a 15-Year and 30-Year Mortgage?
Both a 15-year and 30-year mortgage are fixed-rate loans. The biggest difference between the two is that they have different loan terms. A 30-year mortgage will take 30 years, or 360 monthly payments. Compare this to a 15-year term, which will take less time and where borrowers will end up paying less in interest over the loan’s life of 180 months.
Since a 30-year mortgage spreads out your monthly payments for a longer period of time, you’ll make lower monthly payments compared to one for a 15-year term. However, it’ll also mean that you’ll end up paying more interest throughout the lifetime of the loan because of both the duration of the loan and, typically, a higher interest rate.
Are Interest Rate and APR the Same?
The terms interest rate and APR tend to be frequently confused, with many consumers believing that they’re one and the same (they’re not). It’s important to understand the differences so you understand exactly what you’ll be paying when it comes to your mortgage.
The interest rate is just that, the cost you’ll pay to borrow the money. The APR, on the other hand, includes the interest rate plus additional fees involved in obtaining the mortgage. These costs include any application fees, broker fees, discount points, and closing costs. It also factors in rebates you get back. The APR is usually expressed as a percentage.
It’s because of these additional costs that the APR is greater than the interest rate. There are some exceptions, such as when a lender provides a rebate for a portion of the interest charged.
Why Are Rates Lower for a 15-Year Mortgage?
Rates for mortgages are set based on bond prices in the mortgage-backed securities market. Investors of bonds want to park their cash in a more low-risk investment, one that offers a decent rate of return that will keep up with the rate of inflation.
Since inflation rates tend to go up over time, longer-term loans will have higher interest rates compared to short-term ones. That’s because investors can’t accurately project inflation rates farther in advance.
Freddie Mac and Fannie Mae, both government-supported agencies, also impose price adjustments for loan levels, driving up costs of 30-year mortgages. Many 15-year mortgages don’t have these additional fees, which is reflected in a lower rate.
When Is a 15-Year Mortgage a Smart Option?
A 15-year mortgage is a smart option for borrowers who want to save money on interest and can afford the larger monthly payments and are still able to meet their other financial goals and responsibilities. It’s also smart for people who have a steady and reliable income.
For instance, borrowers who want to take out a 15-year mortgage but can’t afford to set aside money in their retirement accounts or savings goals like creating an emergency fund, should probably stick to a longer-term mortgage (a 20-year term is a happy medium). That way, the lower monthly payments allow them more wiggle room in their monthly budget.
For borrowers who have variable income or sporadic income sources, a 15-year mortgage makes sense if there is a realistic plan. In other words, borrowers need to account for the fact that they may not make enough in any given month to make the monthly payments. Having a plan—such as having larger reserves in savings—can ensure borrowers can still make on-time payments and not put their home at risk.
If you make sure you have a plan, the savings are worth it. Let’s say you have a $300,000 mortgage and the rate is 4.25% for a 30-year term, compared to 4.00% for a 15-year term. By the end of the 30-year term, you’ll have paid $231,295.08 in interest compared to $99,431.48, a savings difference of $131,863.60. That’s pretty significant.
However, the price savings equates to a much higher monthly payment. The payment for the 30-year mortgage will be $1,475.82, compared to the 15-year loan, which is $2,219.06. That’s why it’s a smart idea to shop around for the lowest rates and compare different terms to make sure you can comfortably afford the mortgage.
How We Chose the Best 15-Year Mortgage Rates
In order to assess the best 15-year mortgage rates, we first needed to create a credit profile. This profile included a credit score ranging from 700 to 760 with a property loan-to-value ratio (LTV) of 80%. With this profile, we averaged the lowest rates offered by more than 200 of the nation’s top lenders. As such, these rates are representative of what real consumers will see when shopping for a mortgage.
Keep in mind that mortgage rates may 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.