15-Year Fixed Rate Mortgage

You might secure a fixed rate mortgage because of the reliability and security of an interest rate that remains the same during the entire life of the loan. Some other types of loans, such as an adjustable rate mortgages, may include a fixed-rate for a short period of time, but usually only as an introductory or teaser rate. That’s probably why fixed rate mortgages are the most popular type of home loans in the United States. However, if you do choose a fixed rate mortgage, your decision doesn’t end here–you must decide how long you want the loan to last.

Why Choose a 15-Year Fixed Rate Mortgage?

Fixed rate mortgages can be taken out for different lengths of time, known as terms. The term of your loan can vary for any length of time, but typical terms in the United States are 15-year mortgages and 30-year mortgages.

One of the biggest benefits of a 15-year fixed rate mortgage is that it remains consistent, allowing you to know exactly what your mortgage interest and principal payments will be for all 15 years and plan your budget accordingly. Additionally, however, a shorter term than loans that last 30 or more years mean you pay less in interest over time, too.

A fifteen year mortgage is often a popular option for refinancing a home or for taking out a second mortgage because of the fact that it offers a shorter term than a 30 year mortgage, making the overall cost of the loan lower. Still, by virtue of the fixed rate, you are assured that the interest rate will remain unchanged for the duration of the mortgage unlike ARMs.

For example, let’s say you decide to redo your kitchen. To finance the home improvement, you take out a 15-year fixed rate second mortgage at 6 percent interest. That rate will not change no matter what happens to the market rate of interest. Whether the market index goes up to 7 percent or goes down to 5 percent, your interest rate will remain the same.

Compared to an adjustable rate mortgage (ARM), this type of home loan is simple, easy to understand and consistent. It is best suited to someone who wants a reliable idea of what their payments will be from month to month.

However, there are other options for making your home loan more affordable through fixed-rate mortgages. Though you pay less interest overall with a 15-year fixed rate mortgage, extending the term length could help you lower your monthly payments. This often helps buyers fit a new home into their budget more easily. Find out more about the other most popular form of mortgage loan, the 30-year fixed rate mortgage.