15-Year Fixed-Rate Mortgages: Is It Right For You?

Mortgage Dove

15-Year Fixed-Rate Mortgages: Is It Right For You?

Are you considering buying a home but unsure which mortgage to choose? If you're looking for a quicker way to pay off your home loan, a 15-year fixed-rate mortgage might be a better option for you than a traditional 30-year mortgage. 

But what exactly is a 15-year fixed mortgage, and how does it work? Don't worry, we're here to help you understand. 


15-Year Mortgage Defined

A 15-year mortgage is a type of loan that you can use to buy a house or refinance your existing mortgage. It is a fixed-rate mortgage, meaning the interest rate stays the same for the entire 15-year loan term. You can get a 15-year mortgage from different types of lenders, including government-backed agencies like the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the U.S. Department of Agriculture (USDA), or private lenders. Many homeowners opt for a 15-year mortgage to reduce the amount of interest they pay over the life of the loan and to pay off their mortgage in a shorter period.


How It Works

A 15-year fixed-rate mortgage has a fixed interest rate for the life of the loan, leading to a set monthly payment and easier budgeting. While it costs less overall due to lower interest rates and faster repayment, the higher monthly payments may strain your budget compared to longer repayment terms.


Several Types of 15-Year Mortgages

If you're planning to take out a 15-year mortgage, it's essential to understand the many types of loans available. Here are some common types of home loans offering 15-year mortgage terms:


FHA Loans

These loans are mainly designed to help lower- and middle-income households and first-time home buyers. They have a relatively low credit score requirement and a minimum down payment of 3.5%. However, they may have some income eligibility requirements and higher costs than other options.


VA Loans

VA loans benefit eligible veterans, active-duty service members, and qualifying surviving spouses. They have no minimum down payment requirement and no minimum credit score requirement. Nevertheless, different lenders may set their own credit score requirements.


USDA Loans

USDA loans are offered by the U.S. Department of Agriculture and are available to borrowers in qualifying rural areas. They're typically designed for low-income homebuyers with less-than-perfect credit scores. These loans offer more advantageous fees than other loan options, and they can enable borrowers to purchase a home without having to make a down payment on the property.


Conventional Loans

These are 15-year loans offered by private lenders rather than the government. They often come with a lower down payment requirement than FHA loans for first-time homebuyers. However, they have higher credit score requirements. To meet the requirements for a mortgage, you will generally need to have a credit score of 620 or higher and you must be able to provide a down payment of 3% or more of the total value of the home.


Advantages and Disadvantages of a 15-Year Mortgage

In order to determine whether a 15-year mortgage is right for you, let's take a look at both its advantages and disadvantages:



You Can Build Equity Faster

If you pay off your mortgage in 15 years, you'll own more of your home faster than if you had a 30-year mortgage. This means you can use the money you've built up to borrow more money if you need it for home improvements.

  • You Will Pay Less Interest Overall

When you have a shorter repayment term, you'll end up paying less in interest over the life of the loan. In the long term, this can help you to save a significant amount of money.

  • You Will Own Your Home Sooner

If you want to pay off your mortgage faster, a 15-year mortgage could be the right option for you because it cuts your payoff period in half.



You'll Have Higher Monthly Payments

The biggest downside of a 15-year mortgage is that you'll have to pay more each month than you would with a 30-year mortgage. Although you'll have a lower interest rate, you'll have to pay off your house in half the time, so your monthly payments will be higher.


You'll Have Less Available Cash

If you're devoting more money to your mortgage payments each month, you'll have less money to invest in other areas.


Not Available For All Homes

Lenders want to make sure you can pay back your loan on time, so they may not offer you a 15-year mortgage if they think you can't afford it. This means you may have to choose a longer-term mortgage instead.


15-Year v. 30-Year Fixed-Rate Mortgage

If you choose a 15-year mortgage,  you will pay more each month, but you will save money in the long run with lower interest payments. This means that you will pay off your loan faster and save money in the long run.

Alternatively, a 30-year mortgage has lower monthly payments, which may be more affordable for your budget. However, this means that you will pay more in interest over a longer period of time. 

If you're trying to borrow a large amount of money, a 30-year mortgage may be easier to qualify for because the monthly payments are lower and more manageable. But keep in mind that this means you'll be paying more in interest over the life of the loan.


Should You Get A 15-Year Mortgage?

Are you confused about whether to get a 15-year mortgage or not? Well, the decision depends on two simple questions:


  1. Can you afford to pay higher monthly payments? 


If you are already struggling to pay off your bills, then a 30-year mortgage might be a better option for you, even if you don't plan to live in the house for 30 years.


  1. Do you prefer to pay off your debt quickly or are you comfortable with a longer payment term? 


If you don't mind having debt for a longer period, then a 30-year mortgage might be a better fit for you. On the other hand, if you want to pay off your mortgage faster, then a 15-year term may be a better option.


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