Compare 15-Year Mortgage Rates for January 2025

But they’ve increased quite a bit since then, trending up rapidly throughout 2022 and 2023. Rates are lower now than they were a year ago, and may fall further soon. But it’s unlikely they’ll go as low as they were during the pandemic again. The 30-year mortgage option would save you money in the short term, then you could pay off most or all of the balance with the inherited money. On the other hand, people whose budget can survive a bigger bite each month, may like the benefits a 15-year mortgage can bring such as low interest rates.

Pros and cons of a 15-year mortgage refinance

(This is an option with most every lender, but contact yours to confirm.) You’ll pay less interest and shorten the pay off time while still keeping some wiggle room. Should a financial emergency arise, you can revert to your original, lower payment amount for that month, or as long as you need to, without incurring any penalties. Shopping around for quotes from multiple lenders is key for every mortgage applicant. When you shop, consider not just the interest rate you’re being quoted, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate.

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Then choose a lender, finalize your details, and lock in your rate. For the week of January 5th, top offers on Bankrate are X% lower than the national average.On a $340, year loan, this translates to $XXX in annual savings. If you itemize your tax deductions, you may be able to write off the mortgage interest paid on your 15-year mortgage, your property taxes, and any private mortgage insurance (PMI). Keep in mind that you may also need to pay closing costs and get a home appraisal to refinance.

• If you can comfortably afford the monthly payments on a 15-year fixed-rate mortgage, it’s definitely a good idea.
• Depending on your income or credit score, you might be able to borrow as much as 43% of your monthly income.
• Besides that, choosing to make those extra payments would be up to you.
• The 15 Year Mortgage Rate is the fixed interest rate that US home-buyers would pay if they were to take out a loan lasting 15 years.
• We can only show you today’s 15-year mortgage rates as averages.
• The more equity you have, the greater the portion of the home’s current value you actually own.
• On the other hand, some families would rather pay off the mortgage as quickly as possible, and have room in their budgets to do so.
• The 15-year fixed rate mortgage is most popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college.

Pros of a 15-Year Fixed-Rate Mortgage

One way to build equity (the value of your home minus what you owe on it) is to pay back the principal balance of your loan, rather than just the interest. For example, on January 6, 2025, the average rate on a 15-year purchase mortgage was % (% APR) as opposed to that % (% APR) on a 15-year refinance. Opting for this loan structure means the rate will not change for the life of the loan, something that can be appealing to renters who face annual rent hikes as inflation and cost-of-living increases. Wells Fargo has provided this link for your convenience, but does not endorse and is not responsible for the products, services, content, links, privacy policy, or security policy of this website.

Pros of refinancing to a 15-year mortgage

You spend some time reviewing your financial situation and deciding whether a shorter term is the way to go. Maybe you’re confident in your job stability and the prospect of an upcoming promotion or two in the next few years. Additionally, you have little to no debt and have no problem cutting back if things get too tight with your budget. The advantage of a shorter-term loan is that you’ll spend much less on interest once you pay off your home. It could even be hundreds of thousands of dollars, depending on where you live and your loan amount. That’s a lot of money you get to keep instead of giving to a bank.

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• It’s also possible to refinance into a shorter-term mortgage once you’re in a better position financially, perhaps once you’re a bit older or close to retirement.
• Other factors that have an impact on mortgage rates include the number of mortgage points you’re paying for and the amount of money you’re willing to put down.
• I understand the math on leverage, but not paying interest is still better than paying interest IMO.
• If you’re uncertain about how hefty a mortgage payment you can afford in the first place, try a home affordability calculator.
• With a 15-year mortgage, you can be the most unfocused person.

But the more widely you cast your nets, the better your chance of landing an ultra-low rate. At the beginning of your loan term, a larger portion of your payment goes toward interest. Toward the end of your term, you finally start paying more toward the loan balance. In fact, your savings could be even bigger because purchase rates are sometimes lower than refinance rates. That’s a big difference — and one that not many homeowners would be willing or able to handle.

Additional resources on 15-year refinancing

Greg McBride is a CFA charterholder with more than a quarter-century of experience in personal finance, including consumer lending prior to coming to Bankrate. Through Bankrate.com’s Money Makeover series, he helped consumers plan for retirement, manage debt and develop appropriate investment allocations. Before joining Bankrate in 2020, I spent more than 20 years writing about what is the 15 year mortgage rate real estate and the economy for the Palm Beach Post and the South Florida Business Journal. I’ve had a front-row seat for two housing booms and a housing bust. I’ve twice won gold awards from the National Association of Real Estate Editors, and since 2017 I’ve served on the nonprofit’s board of directors. Discover the details about what credit score you’ll need for a mortgage.

Mortgage Tools

For many people, the lower payments of a 30-year mortgage are more affordable and offer an extra level of security in case times get tough. You can always make extra payments each month, effectively turning your 30-year term into a 15-year one. If you have a 30-year mortgage and are more than halfway through your loan term, refinancing into a 15-year loan with a lower rate could save you thousands in interest. Bankrate’s 15-year vs. 30-year calculator can help you make the decision. Keep in mind that rates have shifted dramatically over the past few years. If that same family chooses a 30-year mortgage at 5.34%, their monthly payments would be $669.

They cost much less than other mortgages.

After 11 rate hikes since 1Q2022, the demand for mortgages declined. However, in 2024, mortgage rates are finally coming down and the Fed is set to cut the Fed Funds rate by three or more times. Expect mortgage rates to continue fading lower in 2025 and maybe in 2026.

What is the disadvantage of a 15-year mortgage?

This is the tradeoff between 15-year mortgage rates and 30-year rates. But if you have plenty of monthly cash flow, this might be the right loan type for you. LoanDepot’s easy-to-use calculator puts you in charge of estimating your mortgage payment.

As the economy continues to improve, the gap between the average 15-year mortgage rate and the average 5/1 ARM rate will likely narrow. Starting around early 2019, the average 15-year mortgage rate average began to consistently fall below the average 5/1 ARM rate (green line lower than orange line). But after so many years of taking out mortgages, refinancing them, and paying them off, a 15-year mortgage is probably the best mortgage to get, if you can afford it. With the Federal Reserve finally embarking on its multi-year interest rate cut cycle starting in September 2024, there should be more room for homeowners to refinance or get new mortgage loans. If you want to save on mortgage interest expense, getting a 15-year mortgage is your best bet. Pennymac Correspondent Group specializes in the acquisition of newly originated U.S. residential home loans from independent mortgage bankers, banks and credit unions.

• Zillow Group Marketplace, Inc. does not make loans and this is not a commitment to lend.
• A 15-year fixed mortgage may attract a higher monthly payment, but you pay thousands less in interest and build equity in your home much faster.
• Thus, if your main goal is to build equity, it would be advantageous to choose a shorter term such as a 15 year fixed.
• A homeowner who maybe wisely opted for the 15-year fixed would have over $70,000 in home equity (not to mention any home price appreciation during that time).
• Whether it be a purchase or refinance transaction, our friendly experts will find the best loan for your unique goals, not their wallet.

Budgeting

Now let’s look at a $350,000 house with a 15-year fixed-rate mortgage at 3.5%. With the shorter mortgage, you’ll pay $2,500 a month for a total of $450,000. That’s only $100,000 in interest, significantly less than what you would pay on the 30-year loan. Also note that 15-year fixed-rate mortgages have a lower interest rate than 30-year fixed-rate mortgages.

How does a 15-year fixed-rate mortgage compare to a 5-year ARM?

We used The Mortgage Reports refinance calculator to show how 15-year refinance savings might compare to a 30-year refinance. Get informed about the mortgage and homebuying process, from starting your home search to planning your next move. Opting for a 30-year mortgage might allow you to also put more money in an IRA or 401(k) plan, which will grow tax-free for years until you can withdraw it without penalty. Weighing the advantages of 15-year-mortgages against 30-year-mortgages is as easy as taking a look at where you are, and where you want to be.

• This equity may become valuable in the future when you wish to draw funds from your home for renovations, upgrades, or expansions.
• I’ve already written at length about the pros and cons of a 15-year fixed mortgage, but some financial experts claim you shouldn’t even buy a home if you can’t afford this shorter-term mortgage option.
• On the other hand, a 30-year loan (for $250,000) would result in a $1,194 monthly payment—well under the $1,500 maximum.
• A good source for weekly rates is Freddie Mac’s Primary Mortgage Market Survey, which releases national averages every Thursday and collects historical rates going back to 1971.
• Borrowers should also know that a 15-year mortgage typically has a lower interest rate than a 30-year mortgage.
• Keep in mind that you need to show the lender that you have enough income to cover a higher payment in order to qualify for the new loan.
• First, consider whether your budget can accommodate the higher mortgage payment of a 15-year loan.

With the loan repayment period cut in half from a traditional 30-year loan, the monthly payment is significantly higher than the 30-year loan. For many, a home purchase is the single biggest purchase they will make in their life, and for some, that cost burden is best spread out over the longest possible period. By refinancing your 15-year mortgage loan, you’ll also be extending your repayment period by another 180 months.

A 15-year fixed-rate mortgage is a home loan that is structured to provide an unchanging interest rate for a shortened period compared to the traditional 30-year fixed-rate option. Investment products and services are offered through Wells Fargo Advisors. We consider a variety of factors when we determine the interest rate and costs of your loan. The process of reviewing these factors to determine your rate is called “risk-based pricing.” Choosing when to lock your interest rate is an important part of the home financing process. During the pandemic, mortgage rates hit historic lows, and 15-year mortgage rates neared 2%.

Using an average of the last 5 years, the interest rate spread on a 15-year fixed-rate loan is about 0.65% lower than the 30-year fixed-rate counterpart. With a 5.125% rate for the 30-year fixed-rate loan, you would end up paying $412,032 in interest. That leaves you paying $223,539 more in total interest with the longer loan term.

Totally makes sense to go 15 year if one has the means and won’t lose out significantly on cash flow for investing. We may consider a cash out refi or home equity line, but also may just wait until the next home in 3-6 years to have a mortgage. I’m pretty confident the housing market is going to stay strong for years to come. The pace of appreciation will definitely slow, but I’m hard pressed to see negative YoY prices with structurally low supply and structurally high demand. With an ARM, there is almost always a maximum interest rate increase cap for the first year of reset (2% at most usually), and a lifetime cap (3%-4% at most).