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You may not hear about it often, but 15-year mortgages are actually quite popular, especially at a time when current mortgage rates are low. In fact, about 15% of all mortgages have a term of 15 years, according to the Urban Institute, a nonprofit research organization.
A 15-year loan term is popular for several reasons, including faster repayment times, lower interest rates, and lower long-term costs. But 15-year loans can also have drawbacks.
If you’re considering a 15-year mortgage, Credible makes it easy view your pre-qualified mortgage rates in minutes.
Current Trends in 15-Year Mortgage Rates
Here’s how mortgage refinance rates have changed over the past 12 months.
Here’s what the average annual mortgage interest rate looked like over the past three decades.
Changing economic conditions, central bank policy decisions, investor sentiment and other factors influence the movement of mortgage rates. Credible’s average mortgage rates and mortgage refinance rates are calculated based on information provided by partner lenders who pay compensation to Credible.
The rates assume a borrower has a credit score of 740 and is borrowing a conventional loan for a single-family home that will be their primary residence. Rates also assume no (or very low) discount points and a 15% deposit.
Credible mortgage rates will only give you an idea of current average rates. The rate you receive may vary depending on a number of factors.
Credible, it’s easy to compare rates from multiple lenders in a few minutes.
Advantages of a 15 year mortgage
A 15-year mortgage offers multiple benefits, including:
- usually have much lower interest rates, saving you money over the life of the loan
- Build home equity faster by paying a higher percentage of principal sooner
- Pay off your mortgage sooner
But 15-year mortgages also have some disadvantages that outweigh the advantages, including:
- Higher monthly payments because the loan spreads the repayment period over fewer months
- Higher payments can reduce your buying power (you’ll have to buy a cheaper house to stay within your budget)
- Higher monthly mortgage payments can make it difficult to meet other financial goals, like saving or investing
Before taking out a 15-year mortgage to purchase a home, you should pull your credit report and check your credit score. Higher scores mean lower rates, so if yours is below 740you might consider taking the time to improve it before applying for a loan.
You will also want to use a mortgage calculator compare a 30-year loan to a 15-year loan. This can help you understand the impact of the two options on your home buying budget, as well as your monthly and long-term costs.
Finally, you should shop with at least three to five lenders. Once you’ve applied for approval, they’ll give you a loan estimate, which you can then use to compare each offer’s APR, closing costs, coststerms and other details line by line.
How to get a good 15-year fixed rate
Mortgage lenders Generally look at three main factors to determine your interest rate: down payment, credit rating, and debt-to-income ratio (DTI). Improving any of these areas can help lower your interest rate, as well as your chances of qualifying for the loan.
It could look like:
- Increase your down payment
- Improve your credit score
- Pay off debts
- Increase your income with a side gig or overtime
You should also pull your credit report and alert the credit bureau of any errors you find. When corrected, this could improve your score.
What credit rating do you need to get a good 15-year mortgage rate?
the credit score you will need to qualify for a mortgage may vary by lender and mortgage type. For example, you might qualify for an FHA loan with a credit score of 500 if you also have a down payment of at least 10%. And VA loans and USDA loans generally don’t have minimum credit score requirements.
For conventional loans, however, lenders generally reserve their lowest interest rates for borrowers with the highest credit ratings – those in the “very good” or “exceptional” categories.
Here’s a full breakdown of the score ranges, according to FICO:
- 580 or less: Poor
- 580 to 669: Fair
- 670 to 739:Good
- 740 to 799: very well
- 800 or more: Exceptional
Is a 15-year fixed mortgage a good deal?
A 15-year fixed rate mortgage can be a good decision if you want to minimize your interest costs or pay off your loan in less time. But if you focus on achieving lower monthly mortgage payments or if you want a larger home buying budget, this may not be the best solution.
If you’re still not sure which is good, consider talking to a mortgage broker or loan officer. They can quote 15- and 30-year mortgages to determine which best suits your goals.
Checking your prequalified rates on Credible does not affect your credit score.
Fixed rate loans are the most common type of mortgage, and they have a constant interest rate and payment for the life of your loan. Another option, however, is the variable rate mortgage, where the interest rate fluctuates over time.
While adjustable rate mortgages, or ARMs, typically come with lower initial interest rates, those rates can increase over time (and cause your monthly payments to increase as well).
These loans are generally best if you know you’ll only be staying in the house for a short time, if you expect to earn more income before your rate can go up, or if you’re sure you can refinance at that time. -the. Again, speak to a mortgage professional if you’re unsure which loan product is best. They can review your credit, budget and long-term goals and help you determine the best mortgage for your financial situation.