The best 15-year mortgage rates for 2021

Frequently Asked Questions

What is a 15 year mortgage loan?

A 15-year mortgage is a fixed rate loan for the purchase of a home. The monthly payment, which includes principal and interest, remains the same throughout the term of the mortgage, which is 15 years.

Who should consider a 15 year mortgage?

Homeowners who want to save significantly on their mortgage and can afford the highest monthly payments are best suited for 15-year mortgages. This is because these types of loans tend to have lower interest rates – government-backed agencies like Fannie Mae and Freddie Mac tend to impose price adjustments on the loan level, which increases loan prices. 30-year mortgage costs.

Borrowers considering a 15-year mortgage should consider whether they can afford the monthly payments, as they will be higher than a 30- or 20-year mortgage because you pay off the loan in less time. It is essential that you determine if you have enough savings and wiggle room in your budget to allow yourself the highest payments on top of your other monthly obligations.

Does the Federal Reserve set mortgage rates?

It is a common misconception that the Federal Reserve decides traditional mortgage rates. While not doing this directly, the Federal Reserve does influence lenders to raise or lower their rates.

How it works is that the Federal Reserve (more specifically, the Federal Open Market Committee) determines the Federal Funds rate which has an impact on adjustable and short-term interest rates to ensure the stability of the ‘economy. These two rates are those at which financial institutions such as banks lend each other money in order to meet minimum reserve levels. This means that when rates rise, it is more expensive for financial institutions to borrow from other financial institutions.

It is because of these higher costs that interest rates tend to rise as they will be passed on to the consumer when it comes to loans such as mortgages. Other factors that also influence rates include individual factors such as a borrower’s assets, liabilities, credit, and debts.

What is a good 15-year mortgage rate?

A good rate will depend on your credit profile and other financial considerations. Lenders want to make sure that you can pay your mortgage on time consistently and look at your financial situation, such as whether you have enough assets, a stable income, and not too much debt that you will have a hard time paying for. mortgage payments.

They’ll also look at your credit rating – the higher yours, the more likely you are to be considered a low-risk borrower, which equates to lower interest rates. On the other hand, the lower your credit score, the more likely lenders are to view you as a higher risk, which means that you will be offered higher rates than the average rate mentioned above.

What are the differences between a 15-year and a 30-year mortgage?

A 15 year mortgage and a 30 year mortgage are fixed rate loans. The biggest difference between the two is that they have different loan terms. A 30-year mortgage will take 30 years, or 360 monthly payments. Compare that to a 15-year term, which will take less time and where borrowers will end up paying less interest over the 180-month loan term.

Since a 30-year mortgage spreads out your monthly payments over a longer period of time, you will make lower monthly payments than a 15-year mortgage. However, it also means that you will end up paying more interest over the life of the loan due to both the length of the loan and generally a higher interest rate.

Are the interest rate and APR the same?

The terms interest rate and APR tend to be confused frequently, with many consumers thinking that they are one (they are not). Understanding the differences is important in order to understand exactly what you will be paying on your mortgage.

The interest rate is just that, the cost you will have to pay to borrow money. The APR, on the other hand, includes the interest rate plus any additional costs associated with obtaining the mortgage. These costs include administrative fees, brokerage fees, points of call and closing costs. It also takes into account the discounts you get. The APR is generally expressed as a percentage.

It is because of these additional costs that the APR is higher than the interest rate. There are a few exceptions, such as when a lender grants a refund for a portion of the interest charged.

Why are the rates lower for a 15 year mortgage?

Mortgage rates are set based on bond prices in the mortgage-backed securities market. Bond investors want to put their money in a lower risk investment, offering a decent rate of return that will follow the rate of inflation.

Since inflation rates tend to increase over time, long-term loans will have higher interest rates than short-term ones. This is because investors cannot accurately predict inflation rates any further in advance.

Freddie Mac and Fannie Mae, two government-backed agencies, are also imposing price adjustments for loan levels, pushing up the costs of 30-year mortgages. Many 15-year mortgages do not have these additional fees, which translates to a lower rate.

When is a 15-year mortgage a smart option?

A 15-year mortgage is a good option for borrowers who want to save money on interest and can afford larger monthly payments while still being able to meet their other financial goals and responsibilities. It’s also smart for people who have a stable and reliable income.

For example, borrowers who want to take out a 15-year mortgage but can’t afford to put money aside in their retirement accounts or have savings goals like building a retirement fund. urgently, should probably stick with a longer term mortgage (a 20 year term mortgage is a happy medium). This way, the lower monthly payments allow them more leeway in their monthly budget.

For borrowers who have variable income or sporadic sources of income, a 15-year mortgage makes sense if there is a realistic plan. In other words, borrowers should take into account that they may not earn enough in any given month to make the monthly payments. Having a plan, like having larger savings reserves, can ensure borrowers can still make payments on time and not put their homes in jeopardy.

If you make sure you have a plan, the savings are well worth it. Let’s say you have a mortgage loan of $ 300,000 and the rate is 4.25% for a 30-year term, compared to 4.00% for a 15-year term. At the end of the 30-year term, you will have paid $ 231,295.08 in interest compared to $ 99,431.48, for a savings difference of $ 131,863.60. It is quite important.

However, the price savings equate to a much higher monthly payment. The 30-year mortgage payment will be $ 1,475.82 compared to the 15-year loan, which is $ 2,219.06. That’s why it’s a good idea to look for the lowest rates and compare different terms to make sure you can comfortably pay the mortgage.

How we choose the best 15-year mortgage rates

In order to assess the best 15-year mortgage rates, we first needed to create a credit profile. This profile included a credit score ranging from 700 to 760 with a property loan-to-value (LTV) ratio of 80%. With this profile, we have calculated the average of the lowest rates offered by over 200 of the major lenders in the country. As such, these rates are representative of what actual consumers will see when shopping for a mortgage.

Keep in mind that mortgage rates can change daily and this data is provided for informational purposes only. A person’s credit and personal income profile will be the determining factors in the rates and loan terms they can obtain. Loan rates do not include tax or insurance premium amounts and individual lender terms will apply.