Conventional home loans come with 30-year mortgage terms, but consider a 15-year mortgage. Your mortgage rate will be lower with a 15-year loan, saving you thousands.For example, a $350,000 home loan with a 30-year mortgage and a 4% interest rate means that the buyer would pay $251,543 in interest. However, a 15-year home loan with the total and a 3% interest rate means the buyer would pay just $85,066. Who doesn’t want to save that much money, right?
It’s recommended to shop around to find the best mortgage rates. However, we use our proprietary SimpleScore methodology to rank and review the best 15-year fixed mortgage lenders.
The best 15-year fixed mortgage lenders of 2020
- Best for Low Down Payment: Alliant Credit Union
- Best for Bad Credit: New American Funding
- Best for Existing Customers: Bank of America
- Best for Online Lending: Quicken Loans
The best 15-year fixed mortgage lenders at a glance
|Lender||Interest Rate (APR)||Minimum Down Payment|
|Alliant Credit Union||2.625% (2.722%)||0% for first-time homebuyers 5% for repeat homebuyers|
|New American Funding||2.250% (2.610%)||3%|
|Bank of America||2.275% (2.705%)||5%|
|Quicken Loans||2.375% (2.833%)||3%|
Rates accurate as of July 22, 2020
Alliant Credit Union — Best for low down payment
Alliant offers a 15-year mortgage with a low down payment and interest rate.
Minimum Credit Score3
Our Two Cents — Cash back isn’t just for credit cards and rebates — Alliant offers a hefty sum to customers who use its network of real estate agents and loan officers.
New American Funding — Best for people with bad credit
Best for people with bad credit since an actual person — not a computer — will review your application.
Minimum Credit Score4
Our Two Cents — New American Funding is great for those with bad credit, but you might have to do some digging to get a list of its mortgage fees.
Bank of America — Best for in-person lending
Bank of America likely has a branch near you so you can speak face-to-face with someone about your mortgage.
Minimum Credit Score4
Our Two Cents — Bank of America is the Swiss army knife all personal finance needs, including finding the key to financing your new home.
Quicken Loans — Best for online loans
Quicken loans is the best mortgage lender choice if you want the convenience of completing the process all online.
Minimum Credit Score5
Our Two Cents — Go completely digital with Quicken Loans — the leader in online home loans, Quicken can help find your home without you leaving your home.
What is a 15-Year Fixed Mortgage?
A 15-year fixed-rate mortgage is a type of home loan that breaks up your repayments over 15 years and has the same interest rate and monthly payment over the whole term. This type of mortgage is a good alternative to 30-year loans because it offers lower interest rates.
If you go with a 15-year mortgage, you’ll pay less interest over the life of the loan and build equity faster, but you’ll also have a higher monthly payment. That’s probably why 30-year fixed mortgages are still the most common type of home loan.
Still, if you can afford to pay a little more for housing each month, getting a 15-year mortgage is often a sound financial decision, and a safer bet than a 10-year mortgage, which has even higher monthly payments.
How 15-year mortgages work
A 15-year mortgage is worth it if you can afford the higher monthly payments. Traditionally, lenders offer 30-year mortgage loans with 360 monthly payments. This was traditional because after you bought a home in your 20s or 30s, you’d have it paid off by the time you reached your 50s or 60s, just in time to retire.
A 15-year mortgage instead has 180 total monthly payments. It provides a lower interest rate and lower interest costs over time. You need a good income to afford a 15-year mortgage, because the monthly payments will be nearly double that of a standard 30-year loan.
These 15-year mortgages work just like other home loans. The only difference is the length of the loan. You will have your house paid off in 15 years (or less if you pay more than the amount due each month). You’ll need to choose a lender, find a local real estate agent, shop for a home, pick the home you want, and then fill out an application for your loan.
You can choose between a fixed rate 15-year mortgage or a 5/1 ARM with a variable rate. A fixed rate is usually better because your interest rate will stay the same no matter what. An adjustable rate can change, and could bring your mortgage payment up, bringing an unwelcome surprise. The best one to go with is the fixed rate term, especially while interest rates are low.
Compare and research the best mortgage lenders and find the best one for you and your financial situation.
Historical 15-year mortgage rates
According to Freddie Mac, 15-year mortgage trends were lower in May of 2020 than they were in the previous two years. The current monthly average on a fixed rate 15-year mortgage is 2.69%. That’s down almost a full 1% from May 2019. This could be due to COVID-19 slowing down anyone looking to buy a new house. Since the pandemic, many states and countries have been in a lockdown and only going out when absolutely necessary.
The pandemic has put millions of people out of work. Not many people are looking to buy a new home in this uncertain time. Furthermore, stay-at-home orders have made it difficult for buyers and sellers. Sellers can’t stage and show houses, buyers can’t go look at houses, and buyers are hesitant to apply for a mortgage without job stability, according to The Poynter Institute.
Cost over time
A 15-year mortgage loan means a lower cost in interest, which means it will cost you less over time. The average interest rate on a 15-year mortgage loan is 2.86%, according to Bankrate. That’s over 1% less than the 3.41% interest rate on a 30-year mortgage. You can save thousands over time with that lower rate.
So, let’s say you get a $350,000 home loan with a 30-year mortgage and 3.41% interest. You’re going to end up paying a total of $559,485 on that loan. That’s $209,485 in interest alone. Let’s take that same $350,000 home and finance it with a 15-year loan at 2.86% interest. You’ll pay a total of $430,837, making your total interest cost $80,837. That’s a savings of $128,648 over the term of the loan.
30-year vs. 15-year mortgage
A 30-year loan has more payments (360 to be exact), and that gives you a lower monthly payment but higher interest rates. A 15-year loan has less payments (180), and that gives you a higher monthly payment but a lower interest rate. With the 15-year term you’ll pay your loan off in half the time and build your home equity faster.
A 30-year mortgage is the better choice if you simply cannot afford the higher monthly payments. Try to pay more on this loan when you can to lower your overall interest costs. You can also get a better, more expensive home with the 30-year mortgage than you could with a 15-year mortgage. Which one you choose depends on your financial situation.
Pros and cons of a 15-year mortgage
How to choose the best 15-year mortgage for you
- Figure out your total home buying budget, which depends on your income, expenses, and debts. Your monthly payment should be 25% or less of your monthly income.
- Find a low interest rate. The lower, the better, but weigh all of the lender’s details. You might find that lender option one has the lowest interest rate but doesn’t have something else you want.
- Calculate how much of a down payment you can make. The bigger your down payment is, the smaller your total loan will be, saving you money in the long run.
- Look for a lender that has a low or zero minimum required down payment if you don’t have much saved.
- Scope out mortgage loan fees. Ask the loan officer for a list of all fees if necessary.
- Figure out what your total closing costs will be so you can be prepared. You can estimate them now and start saving.
- Check the lender’s J.D. Power score. You’ll want a lender with excellent customer service. Note how you can contact them (phone, email, text, or in person) and when you can contact them.
[Read: Finding the best mortgage lender]
15-year mortgage FAQs
What’s the interest rate on a 15-year mortgage?
The current average interest rate on a 15-year mortgage is 2.69%, according to Freddie Mac.
How much can you save on a 15-year mortgage with good credit?
According to FICO, if you have a low credit score (620–639), your 15-year mortgage payments for a $200,000 home will be (on average) $1,527 per month with a 4.468% interest rate. If you have a high credit score (760–850), your 15-year mortgage payments for that same $200,000 home will be $1,370 with a 2.879% interest. That’s a savings of $28,289 in interest alone.
What is the down payment on a 15-year mortgage?
That depends on the minimum required down payment from the lender and how much you can pay. It’s best to save as much as you can for a down payment. It will decrease your total loan, saving you money on interest charges over time.
Is it a good time to take out a 15-year mortgage?
Buying a home is an incredibly personal purchase. It all depends on your financial situation. It’s a good time to take out a 15-year mortgage if you have good credit and high income.
Too long, didn’t read?
If you can afford the higher monthly payments, opting for a 15-year mortgage is a smart financial move. You’ll pay much less interest over the life of your loan and will be mortgage-free in half the time. To maximize your savings, take your time and shop around to find the best 15-year mortgage rates and find a lender you want to do business with.
- What is an Interest-Only Mortgage?
- PMI: What is Private Mortgage Insurance?
- What Are Mortgage Points and How They Can Cut Your Interest Costs
The SimpleScore is our proprietary scoring metric to compare products and services at The Simple Dollar in a transparent, evidence-based way. Our editorial team identifies five quantifiable aspects to compare for every brand, determines the rating criteria for each aspect score, then averages the five aspect scores to produce a single SimpleScore. For 15-year mortgage loans, we compared perks, credit impact to check rates, fees, customer satisfaction and product variety. Our ratings are meant to be a directional tool to help you in the process of choosing a 15-year mortgage loan. Be sure to continue your research and shop around for the best 15-year mortgage loan that fits your specific needs.
We welcome your feedback on this article and would love to hear about your experience with the mortgage lenders we recommend. Contact us at firstname.lastname@example.org with comments or questions.