Mortgage guide
A 15-year fixed-rate mortgage is paid off in 180 monthly payments, and the interest rate never changes. Because the loan is paid down in half the time of a 30-year, you pay far less interest over the life of the loan and build equity much faster. The tradeoff is a noticeably higher monthly payment. It fits buyers and homeowners with strong, steady income who want the house paid off sooner and can carry the bigger payment comfortably.
The 15-year fixed is the loan for people who want to be done. Same payment every month, no surprises, and in 15 years the house is yours.
It's a great loan. It's also a big commitment. Here's how it works and how to tell whether it fits you.
You borrow a set amount at an interest rate that's locked for the life of the loan. The payment is figured so the loan is paid off in exactly 15 years if you make every payment on time.
The part of your payment that goes to the loan never changes. Month one and month 180 are the same number.
Most payments also include property taxes and homeowners insurance in an escrow account, and some include mortgage insurance. Those can go up or down, so your total payment can change even though your rate doesn't.
Interest is figured each month on what you still owe. On a 15-year loan, two things work in your favor at once.
First, you're paying the balance down twice as fast, so there's less balance for interest to land on each month. Second, the rate itself is usually a little lower. Put those together over the life of the loan, and the total interest is a fraction of what a 30-year costs on the same amount.
The same idea from the 30-year article applies here, just faster. A stuck car takes a few hard shoves before it rolls. On a 15-year loan, you're pushing harder from day one, so it starts rolling a lot sooner.
Same structure, different speed:
Here's the honest middle path: take a 30-year for the lower required payment, then pay it like a 15-year when you can. You won't get the 15-year's lower rate, but you keep the option to drop back to the regular payment if life gets expensive. Some people value that flexibility more than the rate difference. Read more on the 30-year fixed-rate mortgage.
An adjustable-rate mortgage, or ARM, starts with a fixed rate for a set number of years and then adjusts with the market. It can make sense if you're confident you'll sell or refinance before the fixed period ends. The 15-year fixed makes more sense if you plan to stay and want both certainty and a paid-off home. Read more on the adjustable-rate mortgage.
A lot of people come to a 15-year through a refinance. If you've paid a 30-year for several years and rates are favorable, moving to a 15-year can shorten your loan without as big a payment jump as you'd expect, because your balance is already lower.
Refinancing has costs, so it should save you more than it costs over the time you plan to stay. On a conventional loan with private mortgage insurance, refinancing can also be a way to drop mortgage insurance once you have enough equity. See Refinance.
You can still pay extra on a 15-year, and it shortens the loan even more. Make sure the extra money is marked as principal, and check that your loan has no prepayment penalty. Federal rules allow prepayment penalties only on certain fixed-rate loans, and only in the first three years, so many loans today don't have one. Read your note to be sure.
It depends on the loan amount and rates on the day you lock. The 15-year payment is often noticeably higher. Ask us to show both side by side with your real numbers.
Usually, yes, by a little. Lenders generally price shorter fixed loans a bit lower because their money is paid back sooner.
Yes, by refinancing. Or you can keep your 30-year and simply pay extra each month, which gets you most of the way there without refinancing costs.
It can. The higher payment counts against your income when the lender reviews your application, so the same income may support a smaller loan amount on a 15-year.
For many people it brings real peace of mind. But don't drain your savings or skip retirement contributions to do it. A conversation with your financial advisor is worth having.
They depend on your credit, down payment, loan type, and the day your loan is priced. Get a personalized rate quote.
See your buying power or book a call, and we'll show you a 15-year and a 30-year side by side, so you can see the difference in your payment and your total cost. See Buy a Home for the full process.
