15-year mortgage rates

Current mortgage rates

Historic 15-year mortgage rates over the last decade

Here are the lowest 15-year fixed mortgage rates each year, from 2011 to 2020:

Current 15-year rates are now higher than they have been in recent years and are likely going to continue increasing. If your finances are in a good place, you could still lock in a rate under 4%.

What is a 15-year fixed mortgage?

When you buy a home, you choose between two basic types of mortgages: a fixed-rate mortgage or an adjustable-rate mortgage.

A fixed-rate mortgage locks in your interest rate for the entire life of your loan. An adjustable-rate mortgage keeps your rate the same for the first few years, then changes it periodically, usually once per year.

When you choose a fixed mortgage, you select the term length. A 30-year is the most common term length for new mortgages, but most lenders offer 15-year terms, too.

A 15-year fixed mortgage keeps your rate the same for all 15 years, until you've completely paid off your mortgage. If mortgage rates in the US trend upward or downward during those 15 years, you won't be affected. Whereas if you had chosen an adjustable-rate mortgage, your rate would go up or down every year based on the economy.

More on Mortgages:

The best mortgage lenders
30-year mortgage rates
The average mortgage interest rate
The best mortgage refinance lenders
What is a mortgage?
Average mortgage closing costs, by state

Is a 15-year fixed mortgage a good deal?

A 15-year fixed mortgage is a good deal overall right now, but there are still things to consider. 

A fixed-rate mortgage may be a better deal than an adjustable-rate mortgage right now, as rates are rising across the board and it's unclear how much they might increase over the long term. If you lock in a fixed rate right now, you won't have to worry about your rate increasing down the road.

The 15-year rates are lower than 30-year rates, because you're signing up for a shorter term. That's the general rule: The shorter your fixed-rate term, the lower the rate. You'll also pay less in interest over the years with a shorter term, because you'll repay the mortgage sooner.

But your monthly payments will be higher with a 15-year mortgage than with a 30-year mortgage. You're paying off the same amount in half the time, so you'll pay more each month.

How to get a good 15-year fixed mortgage rate

Lenders take your finances into consideration when determining an interest rate. The better your financial situation is, the lower your rate will be.

Lenders look at three main factors: down payment, credit score, and debt-to-income ratio.

• Down payment: Depending on which type of mortgage you take out, a lender might require anywhere from 0% to 20% for a down payment. But the more you have for a down payment, the lower your rate will likely be. If you can provide more than the minimum, you could snag a better rate.
• Credit score: Many mortgages require at least a 620 credit score, and an FHA loan lets you get a mortgage with a 580 score. But if you can get your score above the minimum requirement, you'll probably land a better interest rate. To improve your score, try making payments on time, paying down debts, and letting your credit age.
• Debt-to-income ratio: Your DTI ratio is the amount you pay toward debts each month in relation to your monthly income. Most lenders want to see a minimum DTI ratio of 36%, but you can get a lower mortgage rate with a lower ratio. To decrease your DTI ratio, you either need to pay down debts or consider ways to increase your income.

You should be able to get a low 15-year fixed rate with a sizeable down payment, excellent credit score, and low DTI ratio.

Is a 15-year fixed mortgage a good fit for you?

You might like a 15-year fixed mortgage if you plan to stay in your home for a long time and want to be aggressive about paying off your mortgage.

If you want to move in the next few years, you might prefer a different term. A 30-year fixed rate will come with lower monthly payments. An adjustable-rate mortgage could also be good — you could lock in a lower rate during the intro rate period, then move or refinance before your rate increases.

How to find personalized 15-year fixed rates

We're showing national average mortgage rates, but you can find personalized rates based on your down payment amount, credit score, and debt-to-income ratio.

Use our free mortgage calculator to see how today's 30-year rates will affect your monthly payments and long-term finances.

You may apply for prequalification with a lender to get an idea of the rate you'll pay. If you're ready to shop for homes, you can apply for preapproval.

The pros and cons of 15-year fixed mortgages

Pros

• If mortgage rates increase, you keep your low rate. Unlike an adjustable-rate mortgage, a fixed mortgage locks in your rate for the entire life of your loan. If you chose an ARM, then your rate might increase down the road.
• Predictable payments can make it easier to plan a budget. Granted, certain payments that are wrapped up in your mortgage could change over the life of your loan, such as private mortgage insurance or property taxes. But your interest rate will stay the same from year to year, which could make it easier for you to plan out your monthly expenses overall than if you chose an ARM.
• Shorter terms offer lower rates. Although 30-year fixed rates are still relatively low, you'll get an even lower rate with a 15-year fixed mortgage.
• You'll pay less in interest in the long term. A lower rate isn't the only reason you'll pay less with a 15-year term than with a longer term. Your interest has more time to accumulate with longer terms, so interest payments add up over time. Paying interest for a shorter amount of time works in your favor.

Cons

• If mortgage rates decrease, you're stuck with the higher rate. Locking in your rate for 15 years means you don't benefit should rates go down later. However, rates are increasing right now and are expected to continue rising. And if rates decrease significantly down the road, you might still be able to refinance into a lower rate.
• You'll make higher monthly payments. With a shorter fixed term, you pay off the mortgage in a shorter amount of time, so your monthly payments are higher. Higher payments could be a strain, and they might put you in a difficult position if your financial situation changes later.

What's the difference between a mortgage interest rate and APR?

When searching for rates, you'll probably see two percentages pop up: interest rate percentage and annual percentage rate (APR).

The interest rate is the rate the lender charges you for taking out a mortgage.

The APR shows you the full cost of borrowing, not just the interest rate. A mortgage's APR takes into account things like points and fees paid to the lender in addition to your interest rate. 

The APR gives you a better idea of how much you'll actually pay to get a mortgage.

Read the original article on Business Insider

source https://www.businessinsider.com/personal-finance/15-year-mortgage-rates