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Interest Savings Piling Up For 15-Year Mortgages

By Dan Green

The 15-year fixed-rate mortgage is a long-term, relative bargain versus the 30-year; Mortgage rates are unchanged for conventional, FHA, USDA, and VA mortgages; and, reasons to consider a 15-year loan for your home.

December Jobs Report Weaker-Than-Expected

For home buyers considering a mortgage, it’s an excellent time to look at the fifteen-year fixed rate mortgage.

The fifteen-year mortgage gets less press than its thirty-year fixed-rate cousin, but for people who can be comfortable with its larger monthly payment, the fifteen-year is looking pretty good right now.

According to Freddie Mac which publishes a weekly mortgage rate survey based on more than one hundred U.S. lenders, 15-year fixed rate mortgage rates average near 3.375% right now and 30-year fixeds average near 4.00.

The spread in the rates is less than typical as compared to the last few years, but because of where the rates are and how mortgage payments get calculated, homeowners choosing the fifteen stand to save huge amounts of money relative to borrowers at any other time this decade.

Today’s homeowners choosing the fifteen-year mortgage will pay 65 percent less mortgage interest over the course of paying off their loan as compared to people who choose the thirty.

That’s a $109,000 on a typically-sized loan which is biggest mathematical savings during any period since 2010.

$109,000. And it’s cash.

That kind of money could pay for a lot of things in your life. It can fund retirement, it can pay for an education, it could jump-start career as a real estate investor.

Take a look at today’s 15- year. The timing’s especially good.

Today’s Mortgage Rates

Mortgage rates are mostly unchanged this morning.

Conforming 30-year rates are near 3.875% percent, FHA mortgage rates are near 3.75 percent, and VA and USDA mortgage rates remain near 3.625 percent.

Remember that the rates you get from a lender might be higher or lower depending on your loan size, where you live, and your credit score.

Your choice in loans will make a difference, too.

15-year mortgage rates are less than 30-year rates, and special programs like the 100% Doctor Loan for vets and MDs will vary, too.

Talk to two or more lenders before choosing your rate and for a personalized quote, click to get today’s mortgage rates.

Refinance Without Starting Over At 30 Years

On the topic of 15-year mortgages, the 15-year fixed is going to be right for some people, and not so right for others.

You borrow the same amount of money with a fifteen, but you compress the payments into half the time as compared to a thirty-year.

Because of this, the payments with a 15-year loan are bigger each month. You’re paying off the same amount of money but in fifteen fewer years.

However, in your favor is amortization, which is the math of how your loan gets paid back.

On a 15-year, because of amortization, your balance goes down way faster than with a thirty. Two-thirds of your payment is comprised of principal.

With a thirty-year at today’s rates, two-thirds of your payment is interest.

And, because your loan balance is paying down more quickly with a 15-year fixed, lenders feel more safe with the shorter-term loan, which gets you lower rates.

Historically, that discount more is around a half-percentage point.

However, if the payments on the fifteen are going to stress your budget, just plan to keep clear. Unsustainable payments lead to bad outcomes. It’s better to be in control.

See how a fifteen-year mortgage might fit in your budget.

Click here  to get today’s mortgage rates.

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Written by Dan Green

Dan Green is a mortgage lending expert and the founder of Growella. Prior to Growella, Dan was a six-time, top-producing loan officer; and, ranked repeatedly among the top 1% of loan officers nationwide. Dan's home buying expertise has been in print and on TV with The Wall Street Journal, NPR, Forbes, CNBC, and others.

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