Compare Today’s 15-Year Fixed Mortgage Rates
Andrew Dehan8-minute read
November 09, 2020
When buying a home or refinancing, there are several options when it comes to the type of mortgage you can get. One option is the 15-year mortgage.
To make an informed decision on what’s best for you, it’s important to understand current 15-year mortgage rates and weigh the pros and cons.
Types Of 15-Year Mortgages
Both the Federal Housing Administration (FHA) and Veteran's Administration (VA) offer 15-year mortgages. FHA loans have a lower credit score requirement of 580 and a 3.5% down payment requirement. However, they come with higher interest rates, and you have to meet certain income requirements. FHA loans are geared toward lower income households and first-time home buyers.
VA loans are like FHA loans in that they offer the opportunity to buy a home with lower down payment (no down payment for VA loans) and credit scores. They are available to current and former military members and qualifying spouses who meet the requirements of service time.
There are also 15-year conventional loans, which have a lower down payment requirement than a FHA loan, at 3%, but a higher credit score requirement of 620.
Current 15-Year Mortgage Rates
Want to view the most up-to-date information on current 15-year mortgage rates? Visit the Rocket Homes Mortgage Rates page.
This page lays out the daily information on 15-year fixed mortgages in comparison with other mortgage types. You can also view mortgage rate trends over the past year to determine the best time to apply or refinance.
Historical 15-Year Mortgage Rates
The 15-year mortgage was first introduced in 1991. When the 15-year fixed-rate mortgage came on the market, its rate was set at 8.79%, according to Freddie Mac. It peaked at its highest rate in January 1995, with a rate of 8.80%. Throughout the rest of the 1990s, the 15-year fixed mortgage rate fluctuated between 6.36% and 7.4%.
For the early 2000s, 15-year rates trended downward from an average of 7.72% in 2000, to an average of 5.17% in 2003. This drop of more than 2.5% in 4 years is largely due to the recession that happened in 2001. Rates averaged between 5% and 6% until 2008, when the sub-prime mortgage crisis occurred, and the economy dropped out.
In response to the Great Recession, the Federal Reserve dropped interest rates even lower. Rates bottomed-out in late 2012 at 2.66% and crept up to 4.0% in 2018. Due to COVID-19 in 2020, the Federal Reserve slashed interest rates, resulting in historic low interest rates for 15-year mortgages, lower than 2.5%.
Pros Of A 15-Year Mortgage
There are many pros of a 15-year fixed-rate loan that make it attractive to certain home buyers. If a buyer's goal is to build equity, pay off the mortgage over a shorter term and pay less interest, a 15-year mortgage is a great option.
More Home Equity, Faster
The less money you owe on your mortgage, the more equity you have in your home. With a lower interest rate, higher monthly payment and shorter term, a 15-year mortgage helps you pay off your mortgage faster.
A Faster Path To Full Ownership
Many people consider their home to be a big and safe investment. If you're interested in owning your home outright and doing it faster than what a 30-year mortgage will allow, a 15-year loan could be the right option for you, since it cuts your payoff period by half.
Since paying less interest is a big draw of the 15-year mortgage, let's run the numbers. Say your loan amount is $200,000, at a rate of 3.0%. This means you will pay $48,609 over the life of the loan.
Compare this to a 30-year fixed rate mortgage, with an interest rate over the past 5 years that has averaged 0.65% higher than its 15-year counterpart. $200,000 at 3.65% over 30 years means you'll pay $129,371 in interest. That's $80,762 more you've paid to interest that you could have spent elsewhere or saved for retirement.
Want to run the numbers yourself? Use the Rocket Mortgage® mortgage calculator.
Cons Of A 15-Year Mortgage
Although 15-Year mortgages have many advantages, they’re not always the right option for every client. Some may not be able to afford a higher monthly payment, while others may find it safer to invest elsewhere.
Higher Monthly Payments
The biggest drawback for people when it comes to a 15-year loan is the higher monthly payment. Even with a lower interest rate, a 15-year mortgage requires higher payments because you’re paying your house off in half the time of a 30-year loan.
But how much higher are we talking? Let's return to our example from above, with a $200,000 loan and 3% interest rate. The 30-year mortgage has a monthly payment of $675, where the 15-year mortgage has a monthly payment of $1,105. That's $430 more to your mortgage payment every month with a 15-year mortgage – and neither payment includes the additional cost of taxes and insurance.
Less Investment Flexibility
For the sake of the example, let's say you could save that $430 a month. You decide to put it in an investment account with an average 6% annual return. You invest this amount every month for 30 years. Given a steady return of 6%, you’ll have a balance of just over $407,000.
While your home has historically been a safe investment, investing elsewhere while slowly paying off your mortgage may be smarter. It all depends on your financial goals. To calculate a return on investment with your own numbers, use this calculator from Investor.gov.
How Often Do 15-Year Mortgage Rates Change?
Mortgage rates fluctuate daily during the 5-day workweek. They can steadily hold from month to month or can shift due to market changes and economic concerns. In the past 20 years, the moments we've seen with the largest shifts in mortgage rates have to do with recessions. Historically, greater economic uncertainty means lower mortgage rates
Should I Refinance To A 15-Year Mortgage?
Whether you should refinance to a 15-year mortgage depends on timing, your budget and your goals. We already broke down how a 15-year mortgage differs from a 30-year mortgage, but refinancing adds a whole other layer.
If you want to refinance to pay your mortgage off sooner, you need to time it right.
When To Refinance
If rates are dropping, you're planning on staying in your home for a while and you're not close to paying off your current mortgage, consider refinancing. The cost of refinancing needs to be balanced out by the savings you'll receive with a lower interest rate.
If the market has shifted and rates are low enough, refinancing to a 15-year mortgage may not change your monthly payment. This can help you save big on interest, without putting a burden on your monthly expenses.
It should be noted that, if you have an adjustable rate mortgage, it's smart to refinance to a lower fixed rate before your rate adjusts up.
When Not To Refinance
There are several reasons to avoid refinancing to a 15-year fixed-rate mortgage. Ideally you want to see an interest rate drop of around 2% from your current mortgage rate. You should hold off on refinancing if interest rates are going up.
You should also hold off on refinancing if you aren't planning on staying in the home long enough to recoup the costs of the refinance. Refinancing comes with closing costs like home inspections, home appraisals and application fees.
What Is A Good 15-Year Fixed Mortgage Rate?
While rates are always changing, there are a few key factors that distinguish a good 15-year interest rate from one that’s not as good. Remember that daily rates posted are averages and what rate you're offered depends on factors like your credit score and debt-to-income ratio.
A good 15-year fixed rate is at or below the daily average. It typically is 0.5% – 0.75% lower than its 30-year counterpart. In the past 10 years, 15-year fixed-rate mortgages have averaged 3.0 – 4.0%.
Are 15-Year Fixed Mortgage Rates Lower Than 30-Year Mortgage Rates?
Yes, 15-year fixed mortgage rates are lower than 30-year mortgage rates. Since 1991, the 15-year fixed rate mortgage has been 0.5% – 0.75% less than the 30-year fixed-rate mortgage.
The reason banks offer lower rates on the shorter-term home loans is because they are less risky than longer-term loans. A 30-year loan also cost banks more in administration and processing fees. They pass these extra costs onto the lender in the form of a higher interest rate.
What Affects Your Personal Mortgage Rate?
A baseline mortgage rate is determined by the market, not the lender. However, the final rate you’ll pay isn’t the baseline. The lender determines the final rate based on several factors, in addition to the baseline.
Lenders will want to lend to someone who is a responsible borrower, can handle debt and will eventually pay it back. A credit score may help indicate the type of borrower you are. Late or missed payments, high utilization, a short credit history or not enough diversity in your portfolio can negatively impact your credit. Therefore, a low score indicates that you’ve had trouble in one or more of these areas, signaling that you may be a high-risk borrower.
How much you pay in interest could depend, in part, on the location of your home. Interest rates vary by state for several reasons, including the state laws, economy, cost of living and number of lenders in the area.
Home Price And Amount Down
The lower the amount you have to borrow, the lower the risk of lending. And if the home price is low or you pay a hefty down payment (or both) that brings down your principal balance, you won’t have to borrow as much money, making the loan less risky.
Other Mortgage Loan Types To Choose From
Besides conventional 15-year and 30-year fixed-rate mortgages, there are other loan types to choose from when buying a new home or refinancing.
- Adjustable rate mortgages – Adjustable rate mortgages come in 30-year terms. The major forms of these mortgage types are 5/1, 7/1 and 10/1. For each of these, the loan starts with a low rate for the first 5, 7 or 10 years, then adjusts once a year for the remainder of the loan. These types of mortgages are great if you don't plan on staying in the home long-term.
- Jumbo mortgages – Jumbo loans are typically 30-year loans for expensive properties. Conventional loans have limits on how much you can borrow depending on the average property value where you're buying. A jumbo loan is an option if the property you're buying exceeds this limit. Since it's a higher loan amount and a higher risk for the bank, jumbo loans come with higher interest rates.
- Cash-Out refinance – A cash-out refinance is a type of mortgage refinance in which you can turn the home equity you have into cash. You then take on a new mortgage for the rest of what you owe.
The Bottom Line
There are pros and cons to a 15-year mortgage. You'll pay lower total interest and build home equity more quickly than with a 30-year mortgage, but your monthly payment will be higher, making cash tighter.
Refinancing from a 30-year mortgage to a 15-year mortgage with a much lower rate could be an option that may not drastically change your mortgage payment but pay your loan off faster. Use a mortgage calculator to see if the numbers make sense.
If you’re staying in your home long-term and want to pay it off as soon as possible, paying as little toward interest as you can, a 15-year mortgage may be right for you.
Read more about mortgages, refinancing and home buying at the Rocket Mortgage® Learning Center.
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