15 vs 30 year mortgage calculator Which is better?

The main difference between a 15-year and a 30-year mortgage is the loan term. With the former, you must repay the loan within 15 years, whereas with the latter, you have 30 years. Use our calculator to see what your mortgage payment might look like. There are lots of savvy individuals who recommend putting your extra cash somewhere other than the mortgage, such as in the stock market, retirement account, etc. But in areas where homes sell for much, much more, we’re talking a night and day difference in monthly payment.

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In the worst case scenario, a mortgage lender could reject your mortgage application altogether, assuming that you can’t afford to take on additional debt. A 15-year mortgage’s monthly payments are higher than a 30-year mortgage’s—often significantly higher. A 30-year mortgage allows a borrower to stretch out payments over a long time and keep more of their monthly earnings. A 30-year mortgage has a higher interest rate than a 15-year mortgage, and you will pay more in interest rather than principal payments on a 30-year mortgage. Since the monthly payment is higher for a 15-year mortgage, financial planners consider it a type of forced savings.

• Or the 30-year loan might let the borrower buy a bigger home or take on a larger mortgage.
• With this option, the total amount you pay over the life of the loan will usually be higher.
• You can see current 15-year mortgage rates in the table above.
• Through Bankrate.com’s Money Makeover series, he helped consumers plan for retirement, manage debt and develop appropriate investment allocations.
• To get an estimate of how much a 15-year mortgage would cost, enter your details into a mortgage calculator.

How 15-Year Fixed Mortgage Rates Stack Up Against Other Mortgage Rates

You’re technically saving on interest in the short and long term. Again, you’re able to keep more of your money with this particular loan program. You don’t want that thing weighing down your budget for the rest of your life. Knock it out in 15 years or less so you can move on to building extraordinary wealth and living and giving like nobody else.

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Our mortgage loan officers are dedicated to helping you choose the option that’s best for you. Prequalify to see how much you might be able to borrow, start your application or explore 15-year fixed mortgage rates and features. Bankrate is an independent, advertising-supported publisher and comparison service. We arecompensatedin exchange for placement of sponsored products and services, or when you click on certain links posted on our site. However, this compensation in no way affects Bankrate’s news coverage, recommendations or advice as we adhere to stricteditorial guidelines. A good rate will depend on the current average rate, your credit score, the loan-to-value (LTV) ratio, and more.

Investing and retirement

But at an average discount of 0.5%, it is too wide of a spread not to pounce. Instead of buying a $1,200,000 home with a $1 million mortgage, the household buys a $1,000,000 home with an $800,000 mortgage. If the house appreciates by 5% over one year, the household loses out on $10,000 in appreciation by buying the cheaper home. Over a 10-year period, the household loses out on a significant $125,778 in appreciation/equity. With a 15-year mortgage, you can be the most unfocused person.

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Consider these factors when deciding if a 15-year mortgage is the right call. Consumers pay less on a 15-year mortgage—anywhere from a quarter of a percent to a full percent (or point) less, and over the decades that can really add up. So if you’re looking for the best home loan experience, you’ve come to the right place.

Shopping in a low-interest rate market

Using an average of the last 5 years, the interest rate spread on a 15-year fixed-rate loan is about 0.65% lower than the 30-year fixed-rate counterpart. With a 5.125% rate for the 30-year fixed-rate loan, you would end up paying $412,032 in interest. That leaves you paying $223,539 more in total interest with the longer loan term.

How much more a month is a 15-year mortgage?

Though the monthly payments might be higher, they could save thousands in interest. In other words, you want more of your monthly payment to go toward the principal—not interest—so you can own more of your home. With the 15-year fixed-rate mortgage, you pay more toward the principal and build equity faster from your very first monthly payment. On average, 15-year fixed-rate mortgages come with lower rates than just about any other type of mortgage loan. That’s because, with a 15-year loan, there’s less risk for the lender.

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Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people. I’ve already gone through the initial applications with 2 lenders to lock in 15 year at 2.00% with no points and minimal closing costs (just about $1K). O you’ve built up some home equity and grown your savings, it’s worth refinancing to a 15-year mortgage. Alternatively, take out a 15-year mortgage for your next home.

Your interest rate and monthly payment always stay the same.

We took out a 15 year mortgage due to lower interest rates and to force ourselves to have our home paid for by our target retirement dates. There’s a a lot of psychological security in having the roof over your head paid for despite the ability to instead invest the money in the market. Look at Q and the rate differential between 15 year and 30 year. At that time, it would be real hard to justify going with the 30 year and not biting the bullet with higher monthly payments of the 15 year. I’m a big fan of Sam, but this is one area where he and I definitely disagree.

A mortgage calculator can show you the impact of different rates on your monthly payment, as well as the difference between a 15- and a 30-year mortgage. Instead, lenders began focusing on 15-year mortgages to tighten lending standards and increase their chances of getting paid back in full. With a higher monthly payment and a 50% shorter amortizing period, lenders felt more comfortable lending 15-year mortgages at lower rates.

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My husband and I are debt free (paid off the house early a couple of years ago). Now, we are building our future retirement home on land we have owned for several years. The plan was to originally stay in our paid off home but soon realized that one story living and a more energy efficient home was better for us. Our current home is over 100 years old, renovated 25 years ago but now needs many updates.

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While we adhere to strict editorial integrity, this post may contain references to products from our partners. Whether you should wait to buy a house depends on the market and your financial situation. When interest rates are low, you can potentially save money by locking in a low rate. That’s not to say a 15-year fixed won’t save you a ton of money, or that it’s perhaps a cool rule of thumb when setting out to buy a home. At the same time, it’s also perfectly acceptable to just stick with a 30-year fixed the whole way because it’s often a very cheap debt. The argument is essentially that the 30-year fixed mortgage is a bad deal for homeowners and should be avoided at all costs.

Whether you’re buying or refinancing, Bankrate often has offers well below the national average to help you finance your home for less. Compare rates here, then click “Next” to get started in finding your personalized quotes. On Monday, January 06, 2025, the national average 15-year fixed mortgage APR is 6.38%.

In this article, we’ll explain why, the pros and cons of getting a 15-year mortgage, and whether it could be the right option for you. However, the monthly payments in the case of a 15-year fixed mortgage are comparatively higher than a 30-year fixed-rate conventional loan. This is because repayment terms are longer in the latter case. A 15-year fixed rate mortgage will carry a higher monthly payment but you benefit from lower interest charges, and accelerated repayment of principal loan amount.

• If you did that, you’d save yourself 15 years of interest payments.
• When it comes down to it, you always have the option to make a larger payment (or extra payments) on a 30-year mortgage.
• Consumers must initiate a mortgage loan application for a specific property and be under purchase contract for the property at least 30 days prior to lock expiration in order to extend the locked rate.
• For example, let’s say you have a $350,000, 30-year fixed-rate mortgage at 4.5% interest.
• However, it’s important to consider your individual financial circumstances and to speak with a financial advisor to determine if a 15-year fixed rate mortgage is the right choice for you.
• With a $1 million, 15-year mortgage at 3%, $4,405 of the $6,905 payment (63.8%) goes to paying down principal.
• Mortgage rates tend to be lower with 15-year fixed mortgages than 30-year fixed mortgage rates because lenders take into consideration that you’ll pay back the loan in a shorter amount of time.
• But home buyers must also consider the higher monthly payments and whether they can afford them.

Totally makes sense to go 15 year if one has the means and won’t lose out significantly on cash flow for investing. We may consider a cash out refi or home equity line, but also may just wait until the next home in 3-6 years to have a mortgage. I’m pretty confident the housing market is going to stay strong for years to interest rate for 15 year mortgage come. The pace of appreciation will definitely slow, but I’m hard pressed to see negative YoY prices with structurally low supply and structurally high demand. With an ARM, there is almost always a maximum interest rate increase cap for the first year of reset (2% at most usually), and a lifetime cap (3%-4% at most).

No Plans to Stay in the Home

• Instead, use our mortgage payoff calculator to find out what your monthly payment would be on a 15-year term loan and commit to paying that extra amount each month.
• They move roughly in line with 30-year rates (although they are lower) meaning they’ve fallen a lot over the last decade or so.
• Buyers will often opt against a 15-year loan because the shorter loan term puts a heavier strain on their budget.
• But many of those buyers might have been better served if they had opted for a 15-year fixed-rate mortgage instead.
• While I considered refinancing, I can’t justify those costs given how low I am.
• In short, for folks that can afford to do so and FS, why not just pay your mortgage off since given your capital you can afford to and any mortgage is essentially leveraged debt.
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• So with a 5/1 ARM, for example, your mortgage rate will remain fixed for the first five years you have the loan, and then it will change once a year after that.

That’s just a fancy term to describe the process of paying off debt with a planned, incremental repayment schedule. So, if you make your scheduled monthly payments on your 15-year loan, you’ll pay off your mortgage by the end of the 15-year term. 5-year ARMs generally offer a lower initial interest rate compared to fixed-rate mortgages, which may save you thousands of dollars in interest over the life of the loan. Unless you plan to sell or refinance the home before the 5-year ARM’s fixed period ends, a 15-year mortgage is the lower risk option. A 15-year fixed mortgage is a home loan with an interest rate that stays the same over a 15-year period. Because the mortgage is fixed, the monthly payment and interest rate will stay the same for the life of the loan.

Suppose you want to buy a $400,000 house and have a healthy 20% down payment ($80,000). Okay, let’s get the most obvious difference out of the way first. You’ll pay off a 30-year mortgage in 30 years, while you’ll pay off a 15-year in 15 years. By refinancing an existing loan, the total finance charges incurred may be higher over the life of the loan.

Now let’s look at a $350,000 house with a 15-year fixed-rate mortgage at 3.5%. With the shorter mortgage, you’ll pay $2,500 a month for a total of $450,000. That’s only $100,000 in interest, significantly less than what you would pay on the 30-year loan. Also note that 15-year fixed-rate mortgages have a lower interest rate than 30-year fixed-rate mortgages.

There are many different kinds of mortgages that homeowners can decide on which will have varying interest rates and monthly payments. A 15-year fixed-rate mortgage is a home loan paid in equal installments over 15 years. That 15-year period is known as the “loan term,” and a 15-year term usually comes with a higher monthly payment — but lower overall costs — than a 30-year fixed-rate mortgage. Rates on 15-year mortgages are usually lower than 30-year mortgage rates, which means you can save a lot by simply choosing a 15-year loan term. Lenders consider a shorter loan term less risky, which is why they’re willing to offer lower mortgage rates.

With this option, the total amount you pay over the life of the loan will usually be higher. This 15- vs. 30-year mortgage calculator can help you determine which option is right for you. If you already have a 30-year fixed-rate mortgage and are interested in refinancing to a 15-year mortgage, there are a couple key points to keep in mind.

The extra money you’ll spend every month on a 15-year mortgage is money that can’t be spent elsewhere. Getting a 30-year mortgage with a lower monthly payment could enable you to up your retirement savings or put away cash for a new car or a vacation. Be sure to consider the full financial picture before committing to a shorter-term loan. “Currently there are no fixed-income investments that would yield a high enough return to make this work,” says Shah. Rising mortgage rates can make this method even more difficult. The risk might not always pay off if it coincides with the kind of sharp stock market drops that occurred during the downturn of 2020.

The 15-year fixed loan is an alternative option to traditional financing options, including conventional, FHA, VA, and jumbo financing. This 15- vs. 30-year mortgage calculator provides customized information based on the information you provide. But, it also makes some assumptions about mortgage insurance and other costs, which can be significant. Use the total cost and monthly payment estimates to help determine which option is best suited for your needs.