When you’re in the market for a new home, a shorter-term mortgage can mean paying less interest over the long term. However, it also means paying more every month than with a home loan that’s paid off over many years or decades. If the goal is to pay off your home more quickly, it’s important to have a clear idea of what the 15-year mortgage rates are. This information will be crucial in your decision on what mortgage term to choose. A better rate means it’s easier to fit your payment into a monthly budget.
As with any financial product, though, you’ll want to look at the fine print to decide what works best for you. Current 15-year mortgage rates may look favorable, but you’ll have to live with the terms of the contract for a long time. It’s always best to analyze it in context so you know what the right loan is for you.
The 3 Best 15-year Mortgage Rates
- Alliant Credit Union: Best for low down payment
- Rocket Mortgage by Quicken Loans: Best for online
- Wells Fargo: Best for low fees
|Provider||Minimum Down Payment||Interest Rate||APR|
|Alliant Credit Union||0%||3.000%||3.188%|
|Rocket Mortgage by Quicken Loans||3%||3.5%||3.948%|
What is a 15-year Mortgage?
Most prospective homeowners understand that a mortgage is a long-term commitment. By reducing the length of that commitment, they own their home outright much faster. They also pay less interest and save money over time. Lenders typically sell mortgages as packages, such as a 15-year mortgage or a 30-year mortgage. The best 15-year mortgage rates help you to achieve a monthly payment that you can manage.
The choice of term depends on your overall financial goals. You may want to stretch out the repayment time in order to have a smaller recurring payment. That can mean available cash to build up your savings or to devote to other priorities. In addition, a lower payment may mean you can get a larger loan, helping you to buy the ideal home.
What goes into an interest rate? That depends on your lender. To make a decision on a mortgage, it is essential to understand at least three key terms: interest rate, points and annual percentage rate. The interest rate is the amount of interest you will pay on your mortgage. Points are used for a reduction in your interest rate in exchange for additional up-front payment, and annual percentage rate, or APR, is how much it costs to borrow the funds. APR takes into account the interest rate, points, fees and other charges levied by your lender.
When shopping around, look for the details about what goes into the interest rate. A tempting ad may boast about a cheap interest rate, but it may only apply if you pay for points up front.
15-Year Mortgage vs 30-year Mortgage
In order to decide if a shorter mortgage term is right for you, it helps to know some facts about 15-year mortgages versus 30-year mortgages. The interest rate on a 30-year mortgage is usually higher, but the monthly payments are significantly less because to cost of the home is spread out over 30 years. You pay more per month with a 15-year mortgage, so it takes less time to reach the stage where the larger proportion of each monthly payment goes toward the principal and not interest.
For example, a $300,000 loan paid off at 4% over 30 years would incur $215,609 of interest, while the same amount borrowed at 3.25% for 15 years would incur almost a third of the interest at $79,441.
The Best 15-year Mortgage Rates
Alliant Credit Union – Best for low down payment
Credit unions have a reputation of serving their membership with a bit more compassion than big banks. That’s evidenced by Alliant’s 0% down option for qualified first time homebuyers. That can make a big difference for people who want to get in on the housing market but could benefit from more flexible initial terms. Alliant’s 15-year fixed rates are on par with banking competitors, which means those who have never checked out a credit union before may choose to do so if they are on the lookout for home financing options.
Rocket Mortgage by Quicken Loans – Best for online
For those who prefer to undergo an online application process, Rocket Mortgage may be a good choice. The company offers a streamlined digital application with clearly outlined loan specifications. The minimum down payment for a 15-year mortgage is 3%, but as with all mortgage loans, it costs you less in the long run if you put down more up front. Rocket’s interest rates and APR are higher than some of their bank and credit union competitors, but they allow access to the market for those with credit challenges — their minimum FICO score is 620 — or who may experience other barriers to entry.
Wells Fargo – Best for low fees
Of course, the phrase “best for low fees” always comes with a catch. In the case of Wells Fargo, that “catch” may be that you must meet specific parameters to qualify for its favorable terms for a 15-year mortgage rate. First, that there’s a 25% down payment, which, among other things, eliminates the requirement to purchase mortgage insurance. Second, the applicant must have a minimum FICO score of 740. Third, the rates assume the purchase of discount points. However, with those elements in place, Wells Fargo’s deal offers a financially attractive path to homeownership.
Getting the Right Deal for You
If there’s one takeaway from a discussion of 15-year mortgage rates, it’s that you can only find the true cost of the mortgage by looking at the fine print. A low interest rate might require you to buy points, and low fees may assume you have a high credit score or are prepared to make a sizable down payment. If you are on the market to buy a home, it’s usually the case that you can achieve true homeownership faster with a shorter term mortgage. Before agreeing to such a large financial contract, though, it’s sensible to take all the variables into account, including how the new asset — and liability — fits in with your overall financial goals.