A 15 year fixed rate mortgage lets you pay off your home loan quickly while typically securing a lower interest rate than a comparable 30-year loan. This is a traditional type of loan that offers the security of consistent monthly payments for the full term. If you do not plan on moving or selling your home in the next few years and can afford the higher monthly payment, a 15 year fixed rate mortgage can be a smart way to build equity faster and pay significantly less interest over the life of the loan.
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15 Year Mortgage Benefits
The 15 year mortgage offers many benefits, including a predictable monthly payment. Because the term is shorter, borrowers will often see a lower interest rate than they would on a 30-year loan for both purchase and refinance transactions. The rate is fixed for the entire life of the loan, and borrowers still have the option to pay down the principal balance faster by paying more than the minimum payment.
How a 15 Year Mortgage Works
With a 15 year fixed rate mortgage, your interest rate and monthly principal-and-interest payment stay the same for all 180 payments. Because the loan amortizes over half the time of a 30-year mortgage, more of each payment goes toward principal from the start, which means you build equity faster and typically pay considerably less total interest over the life of the loan — in exchange for a higher monthly payment than the same loan amount would carry on a 30-year term.
Is a 15 Year Mortgage Right for You?
A 15 year term tends to make the most sense for borrowers who plan to stay in the home long-term, want to be mortgage-free sooner, and are comfortable with a higher monthly payment in exchange for paying less interest overall. If the higher payment would strain your budget, a 30-year term or an extra-principal-payment strategy on a longer loan may be a better fit — talk with a loan officer about which option matches your goals.
How much higher is the payment on a 15 year mortgage compared to a 30 year mortgage?
Because the loan is paid off in half the time, the monthly principal-and-interest payment on a 15 year mortgage is meaningfully higher than on a 30-year loan for the same amount, even though the rate is typically lower. A loan officer can run the numbers for your specific loan amount so you can compare payments side by side.
Can I pay off a 30 year mortgage on a 15 year schedule instead?
Yes. Some borrowers choose a 30-year mortgage for payment flexibility and then make extra principal payments to pay it off faster. A dedicated 15 year mortgage locks in the shorter term and often a lower rate, but voluntary extra payments on a 30-year loan can offer more flexibility if your income varies.
Want a Lower Payment?
A 30 year fixed rate mortgage is a great way to purchase or refinance and save on your monthly payments. Like the 15 year loan, the 30 year term also offers fixed monthly payments. Typically the payments will be lower because the principal balance is paid off over 30 years rather than a shortened term of 15 years.
Ready to lock in a 15 year rate?
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