Compare 15-Year Fixed-Rate Mortgages
When getting a home loan, most people choose a 30-year fixed-rate mortgage. But maybe you’re not like most people. If you’re in a financial position to cut that payoff timeline in half, you can see some major perks. A 15-year fixed-rate mortgage means bigger monthly payments, but you’ll save thousands of dollars in interest. And you’ll qualify for a better interest rate, too.
Before you dive in with a 15-year fixed-rate loan, though, you should compare this option against other types of mortgages. Let’s help you do precisely that.
What is a 15-year fixed-rate mortgage?
As you can probably guess from its name, this kind of mortgage gets paid off in 15 years and has a fixed interest rate. What does that mean for you as the borrower?
The fixed interest rate provides stability. Your principal and interest (P&I) payment won’t change over the 15 years. That means your monthly payment will only adjust slightly to accommodate fluctuations in costs like property tax and homeowners insurance. Because you know what you’ll need to pay, you should be in a good position to budget and make sure you can always afford your mortgage.
That budgeting is particularly important with a 15-year fixed-rate mortgage. The much shorter timeline changes a lot about the loan, especially when compared to the typical 30-year payoff timeline.
With this option, you pay off your total loan amount in 180 payments (15 years * 12 months in a year) — rather than the 360 of a 30-year loan. That makes each monthly payment a lot bigger. Let’s say you borrow $400,000 with a 6.5% interest rate. With a 30-year loan, you’ll pay just north of $3,000 a month. With a 15-year loan, your monthly payment jumps to nearly $4,000.
But there’s some serious upside here. With the shorter loan term, interest has less time to accrue. With that same loan scenario, the 30-year mortgage means paying more than $500,000 in interest over the life of the loan. With a 15-year loan term, that number drops to around $225,000.
As an added benefit, in the eyes of a lender, shorter loans are lower-risk. With a 15-year mortgage, you should qualify for a lower interest rate than if you applied for a 30-year loan for the same amount.
The pros and cons of a 15-year fixed-rate mortgage
If you’re considering this kind of home loan, you should weigh the benefits and disadvantages.
Pros of a 15-year fixed-rate mortgage
-
The faster payoff timeline means paying a lot less in interest, usually saving you hundreds of thousands of dollars.
-
Lenders prefer the shorter loan term, meaning you can probably get a lower interest rate, further helping you save in interest.
-
Bigger monthly payments help you build equity faster.
Cons of a 15-year fixed-rate mortgage
-
Choosing a shorter repayment timeline makes your monthly payments higher.
-
Those higher payments could make it harder to qualify for the loan if your debt-to-income (DTI) ratio gets above the threshold lenders will accept.
-
With bigger monthly payments, you might feel financial pressure if your income changes.
-
You might also miss out on other opportunities because more of your income has to go to your mortgage, preventing you from investing, saving up, or tapping other financial opportunities.
How to compare 15-Year Fixed-Rate mortgage rates
If you only take one piece of advice when you’re getting a mortgage, let it be this: compare rates from at least three different lenders. Doing so can save you thousands of dollars over the life of your loan.
To make it easier for you to put the work in here, follow these steps:
Step 1: Understand your borrower profile
First, you want to get a handle on how mortgage lenders are going to see you. If you look like you’re going to be able to repay your home loan fairly easily, they’ll offer you more favorable conditions. If you look high-risk, you’re going to pay more for your mortgage. Specifically, you’ll be charged a higher interest rate.
So, what makes a borrower low- or high-risk? To decide what kind of loan to offer to you (if any), lenders look at a lot of factors. The biggest ones here include:
- Your monthly income — you don’t want an overly large chunk to have to go toward paying your monthly mortgage bill, which lenders measure with your debt-to-income (DTI) ratio
- Your credit score, which essentially tells them how good you’ve been with managing money in the past
- Your loan-to-value (LTV) ratio (higher is riskier) — the price of the house and your down payment size both come into play here
If you’re not in good shape in any of these areas, putting in some work before you buy (e.g., working on your credit score, lowering your DTI ratio) can help you get a lower interest rate.
Step 2: Use rate tables to see what’s on offer today
There are lots of resources online that show you rate offers from leading lenders. Use a mortgage rate table to get a feel for what kind of interest rates are available from financial institutions that provide home loans in your area.
Ideally, that rate table lets you input personal information, like your credit score and the price of the house you want to buy. This way, the rates you get shown should align with what you’re actually eligible to get. A lot of lenders advertise low starting rates, but only the “best” borrowers will be approved for them once they apply.
Step 3: Get preapproved with three lenders
Once you’ve picked out a few lenders that look good to you, go through their preapproval process. That will mean filling out some paperwork, but it’s the best way to figure out what you can really qualify for in terms of loan size and interest rate.
Have financial documents — like your bank statement and pay stubs — handy to make it easier to complete your preapproval applications.
Step 4: Compare preapprovals
When you get preapproved, the lender should give you documentation about your potential mortgage. Ideally, this gives you a feel for the total amount you’re borrowing, the repayment term, the interest rate, fees, and closing costs.
Line up your quotes from each lender and go through them, paying special attention to the annual percentage rate (APR). This tells you how much you’ll pay each year for the loan including not just interest, but also fees. By looking at APRs, you get a clear idea of what you’ll truly pay if you choose that specific mortgage. This helps you identify the best option for yourself and your financial goals.
If you’re ready to start comparing 15-Year Fixed-Rate rates, use our rate table to get started. We have fields up top where you can input key details like your credit score range and zip code so we can best tailor the mortgage rate offers to you.