The 15-year fixed rate mortgage is advantageous to those who want predictable monthly payments with a shorter loan term and don’t mind the higher monthly payment. The 15-year mortgage is predictable because the monthly payment does not change over the life of the loan. The life of the loan is cut in half from the traditional and popular 30-year loan. Interest rates on the 15-year mortgage are typically lower than that of the 30-year mortgage.
Because the life of the loan is half of the 30-year mortgage, the monthly payments are higher than the monthly payments on the 30-year mortgage. Due to the higher monthly obligation the 15-year mortgage may be more difficult to qualify for because homebuyers must show their lender they can afford the increased monthly payment. Another significant difference, and a disadvantage to the 15-year mortgage, is that the tax deduction is less than that of the 30-year mortgage.
If you are thinking about the 15-year mortgage, what will you need to get started? Remember, you will need to show your lender that you can afford the higher obligation. Therefore you will need to provide financial paperwork, including paychecks and income tax returns, as well as bank statements. You should shop around for the right lender because banks charge various fees and mortgage rates on the 15-year mortgage. You want to find the best lender who offers the best mortgage rates. Once you choose your lender they will want to review all of your financial documentation to verify you have the gross monthly income required for the 15-year mortgage. The lender will want to know your monthly debt obligations as well so they can compare this against your income. As with any mortgage, your credit score is also a good indicator to lenders of how risky of an investment you are when lending to you.
Currently the rate on a 15-year fixed rate mortgage is averaged at 3.02% and the average fee remains at 0.6 point, according to the Associated Press’s news report on May 10, 2015.
Is the 15-Year Fixed Rate Right for You?
The 15-year fixed rate mortgage is a good option if you are looking to build equity. If you are considering purchasing or refinancing your home, ask yourself the following questions:
- Are you concerned about interest rates rising in the near future?
- Will you stay in your home for an extended period of time?
- Do you want a consistent monthly payment?
- Do you mind a higher monthly obligation as a trade-off for a shorter-term loan?
Those who answered yes to any of the following questions should consider the option of a 15-year fixed rate mortgage. Compared to the other types of fixed mortgages, you pay less interest over the course of the entire loan. Since you are paying one fixed amount for 15 years as opposed to 30 years, you are essentially saving half the total interest payments. This type of loan offers you the security of a fixed rate while paying off your mortgage in less time than a 30-year mortgage.
Remember, with this type of loan, your mortgage payments will never increase over time. Are you worried about inflation? Even if the current market value changes within this 15-year time span, your loan is protected against any hikes in payments. With the 15-year fixed rate mortgage you still build equity relatively quickly, as the term is cut in half from the 30-year option.
If you already know that this is the option for you, please feel free to compare mortgage rates by using our easy online tool. Best Mortgage Rates allows you to compare mortgage rates from hundreds of lenders across the country. Whether you are purchasing a home or refinancing your current home, you can search by rates, APR and payments to find the rate that best suit your loan needs. Just enter the requested information into our online tool and discover the best option for you.