A 15-year mortgage is a good option if you want to pay off your home loan sooner rather than later and also save on interest.
When you buy a house, it’s important to secure the right type of mortgage at the lowest possible rate. A 15-year fixed mortgage has a lower interest rate than a 30-year fixed mortgage, but the shorter loan term means you’ll have higher monthly mortgage payments. If you’re considering a 15-year mortgage, make sure you can comfortably afford the home loan payment in your household budget.
Here’s how 15-year mortgages work and some information on current rates and trends.
Current 15-year mortgage rate trends
Average interest rates for 15-year fixed mortgages are lower than what you’ll find on 30-year fixed mortgages. As of January 3rd, the average rate for a 15-year fixed mortgage is 6.31%, whereas the average 30-year fixed rate is 6.99%, according to data from CNET sister site Bankrate.
Mortgage rates started rising in early 2022 and continued upward throughout 2023 as the Federal Reserve hiked interest rates to counter inflationary pressures. As inflation began cooling, the Fed took a pause from its aggressive rate-hike policy last summer. After a long period of volatility, average mortgage rates have been slowly falling since November. And while rates are still above what they were a year ago, even a fraction of a percentage drop in mortgage rates improves affordability for prospective homebuyers.
Now experts are looking toward the rest of 2024, when the central bank is expected to make three rate cuts. Relaxed monetary policy and changing economic indicators should help 15-year fixed mortgage rates keep a steady downward path in the coming months.
What is a 15-year fixed mortgage?
A 15-year fixed mortgage is a loan you use to buy a house that you’ll pay off over 15 years with a set interest rate. Because it has a shorter term than a mortgage loan with a 30-year term, the monthly payments are higher than with a fixed 30-year loan.
15-year mortgage vs. 30-year mortgage
The main difference between a 15-year mortgage and a 30-year mortgage is that a 15-year mortgage will ultimately cost you less since you’ll have a lower interest rate and pay considerably less in interest over the lifetime of the loan. But paying off the loan in a shorter amount of time means your monthly payments can be almost double what they are for a 30-year loan.
The pros of a 15-year fixed mortgage
- Shorter loan term: A 15-year fixed mortgage takes half the length of time to pay off compared with a 30-year mortgage. You’ll have higher monthly payments, but you’ll pay this home loan off twice as fast, resulting in less interest over time.
- Lower interest rates: Usually, 15-year fixed mortgages have lower interest rates than 30-year fixed mortgages. This is partly because you’re paying back your lender sooner than with a longer-term loan, which means less risk for your lender.
- Build equity in your home much faster: A 15-year fixed mortgage allows you to build more equity in your home faster than with a longer-term mortgage. This means you can enjoy some of the advantages of homeownership, such as refinancing your home loan or tapping into your home equity for financing options.
The cons of a 15-year fixed mortgage
- Higher monthly payments: One downside to a 15-year mortgage is that you’re stuck with high monthly payments for the duration of the home loan. If you make a 20% down payment on a $500,000 mortgage at a 7% interest rate with a 15-year fixed mortgage, your monthly payment will be about $3,994, compared to $3,060 with a 30-year fixed mortgage.
- The maximum mortgage amount you can borrow is smaller: Because you’re making high payments every month, lenders could offer you a smaller mortgage amount than they might with a 30-year loan. This reduces the risk to the lender that you will default on the loan.
- Less financial flexibility overall: If you commit to a 15-year mortgage with a high monthly payment, it could limit your ability to afford other expenses. It means you may have less money to contribute to investment or retirement accounts, or a smaller financial cushion to fall back on if you run into difficulties.
Is it worth refinancing to a 15-year mortgage?
The main reasons people choose to refinance their home loans are to lower their interest rate or adjust the length of their loan term. Given today’s high mortgage rates, you may not be able to secure a lower interest rate, but shortening your loan term can still help you save money.
For instance, if you refinance your 30-year mortgage to a 15-year mortgage, you’ll end up with higher monthly payments but save on interest and build equity faster in the long run.
Before refinancing, consider your financial goals, how much you have left to pay on your mortgage and how long you plan to stay in one place. If you’re almost done paying off your primary mortgage or plan to move in the next few years, refinancing to a 15-year mortgage may not offer much financial benefit.
If you like the idea of paying off your mortgage sooner, but you’re worried about committing to higher monthly payments, there’s an alternative. If you stick with a 30-year mortgage, see if you can make additional payments throughout the year, which will help shorten your loan term. This allows you to effectively pay off your 30-year mortgage sooner without locking yourself into the higher monthly payments that are attached to a 15-year mortgage.
Alternatives to a 15-year mortgage
- 30-year mortgage: If you’re unable to afford the higher monthly payments with a 15-year mortgage, a 30-year mortgage is a good option. While you’ll pay more in interest overall, the lower monthly payments can make purchasing a home more affordable.
- 10-year mortgage: If you can afford the higher monthly payments that come with a 10-year mortgage, you’ll save yourself five years of interest payments. However, you’ll likely require a higher income and credit score to qualify.
- Government-backed loan: If a 15-year mortgage doesn’t work for your particular financial situation, you can also look into a government-backed loan like an FHA loan, VA loan or USDA loan, which will typically have much lower credit score requirements and often allow you to make a small down payment or no down payment at all.
Current mortgage rates
| Product | Interest rate | APR |
|---|---|---|
| 30-year fixed-rate | 7.06% | 7.08% |
| 30-year fixed-rate FHA | 6.07% | 6.96% |
| 30-year fixed-rate VA | 6.20% | 6.31% |
| 30-year fixed-rate jumbo | 7.13% | 7.14% |
| 20-year fixed-rate | 7.00% | 7.02% |
| 15-year fixed-rate | 6.42% | 6.44% |
| 15-year fixed-rate jumbo | 6.49% | 6.50% |
| 5/1 ARM | 6.40% | 7.65% |
| 5/1 ARM jumbo | 6.27% | 7.52% |
| 7/1 ARM | 6.54% | 7.69% |
| 7/1 ARM jumbo | 6.54% | 7.56% |
| 10/1 ARM | 8.10% | 7.89% |
| 30-year fixed-rate refinance | 7.21% | 7.22% |
| 30-year fixed-rate FHA refinance | 6.12% | 7.03% |
| 30-year fixed-rate VA refinance | 6.21% | 6.40% |
| 30-year fixed-rate jumbo refinance | 7.29% | 7.30% |
| 20-year fixed-rate refinance | 7.01% | 7.04% |
| 15-year fixed-rate refinance | 6.42% | 6.44% |
| 15-year fixed-rate jumbo refinance | 6.46% | 6.48% |
| 5/1 ARM refinance | 6.28% | 7.46% |
| 5/1 ARM jumbo refinance | 6.30% | 7.30% |
| 7/1 ARM refinance | 6.40% | 7.54% |
| 7/1 ARM jumbo refinance | 6.44% | 7.52% |
| 10/1 ARM refinance | 7.08% | 7.73% |
Updated on January 04, 2024.
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. The above table summarizes the average rates offered by lenders across the country.
FAQs
You must be able to afford higher monthly payments to qualify for a 15-year loan. Your salary, credit score and debt-to-income ratio -- that is, how much debt you carry each month divided by your monthly income before taxes -- play a more substantial role in the eligibility process for a 15-year mortgage than for a 30-year mortgage. If you have high-interest debt you’re trying to pay down, a lender will factor in those payments when considering if you should be approved for the loan.
A good 15-year mortgage rate would generally be considered anything at or below the national average rate, which is currently at 6.31%, as of Jan. 3, 2024, according to CNET sister site Bankrate.
You can use CNET’s mortgage calculator to help determine how much you can afford for a house and work out how to manage financially. The tool takes into account your monthly income, expenses and debt payments. In addition to those factors, your mortgage rate will depend on your credit score and the zip code where you are looking to buy a house.