Published On: Thu, Jun 11th, 2015

A 15-Year Mortgage Will Save 64% On Your Home Loan

Comparing 15-year fixed rate mortgage rates to 30-year fixed rate mortgage rates; Save 64% with a refinance transition into a 15-year loan

15-YEAR MORTGAGES SAVE YOU MONEY

Current mortgage rates are rising, but remain below their year-ago levels; and within one percentage point of their lowest marks of all-time.

According to Freddie Mac’s most recent weekly mortgage rate survey, 30-year interest rates now read 3.87%, on average, nationwide; and, 15-year rates now read 3.08%.

With mortgage rates low, home buyers have extended their purchasing power and millions of existing U.S. homeowners are now in the money to refinance to lower rates.

Being “in the money” means having a mortgage which is at least 150 basis points (1.50%) above the current market rate; and having a loan with at least $50,000 remaining on its balance and 10 years or more until maturity.

And, for today’s homeowners ready to refinance, it’s the 15-year fixed-rate mortgage which proved to be today’s best “deal”.

15-year mortgage rates currently beat 30-year rates by 79 basis points (0.79%) which yields a mortgage interest savings of sixty-four percent over the life of a loan.

Click to see today’s rates.

THE 15-YEAR MORTGAGE IS A LONG-TERM SAVER’S DREAM

15-year mortgages save money as compared to 20-year and 30-year loans. There are two reasons why.

The first reason is that 15-year mortgages are nearly always available at a lower interest rate and APR than a longer-term loan. With lower interest rates, homeowners pay less mortgage interest on every dollar borrowed.

The second reason why 15-year mortgages save money is that, after 15 years, there’s no more mortgage to repay; the loan is paid in full. This is five years shorter than loans with a 20-year terms.

It’s half the number of years as compared to a 30-year loan.

At today’s mortgage rates, assuming a loan size at the national average of $268,500, homeowners with a 15-year loan pay $119,000 less mortgage interest as compared homeowners with a 30-year fixed rate mortgage.

This is a savings of 64 percent.

To be fair, making a 15-year mortgage payment is more costly on a monthly basis — often by a lot –but the money saved after fifteen years is real. It’s money which can be used for any number of purposes including college tuition payments, retirement funding, or business investment.

The savings can also be used to purchase a second home or vacation property.

Click to see today’s rates.

HOMEOWNERS INCREASINGLY CHOOSE 15-YEAR LOANS

Today’s low mortgage rates have enticed homeowners to choose 15-year loans over 30-year ones.

According to recent refinance data from the government, 1-in-4 of homeowners who refinanced a 30-year fixed rate mortgage last quarter chose to refinance into a 15-year loan instead.

It helps that 15-year mortgage rates have been low relative to 30-year ones.

Conventional 15-year mortgage rates now average 3.08 percent for prime borrowers as compared to 30-year conventional rates which now average 3.87 percent nationwide.

Closing costs are cheaper for 15-year loans, too.

Freddie Mac data shows that the average 15-year mortgage rate requires a borrower to pay 0.5 discount points at closing as compared to a 30-year loan, which requires 0.6 discount points to be paid.

A homeowner in Orange County, California using a 15-year loan, borrowing at the local mortgage loan limit of $625,500 would save $625.50 in discount points versus taking a 30-year loan.

Click to see today’s rates.

CONSIDERATIONS FOR THE 15-YEAR LOAN

The 15-year mortgage offers huge savings to U.S. homeowners, but the program won’t be for everyone — especially because monthly payments are much higher than for a comparable 30-year loan.

At today’s mortgage rates, the monthly payment for a 15-year loan is forty-eight percent higher than a 30-year loan. At a loan size of $268,500, homeowners pay $603 more per month on the 15-year amortization schedule.

This extra $603 can be a budget-breaker for households; and, it can be tougher to meet a lender’s debt-to-income requirements when you’re carrying a larger monthly payment. Before considering the 15-year mortgage, then, make sure your monthly obligation will be a manageable one.

If you find the obligation to be too much, but you still want to pay less mortgage interest over time, you may want to consider refinancing to a new 30-year loan, but making your monthly payments as if the loan was a 15.

You’ll get a new loan at today’s low rates, but your repayment schedule will remain within your control — not the bank’s.

This is because when you refinance a mortgage, as the homeowner, it’s your prerogative to send extra principal to the bank each month along with your monthly payment. You can send as much or as little as you like.

If you’re keen on having your loan paid-in-full in 15 years, ask your lender what to send extra each month or use the home mortgage calculator and check it out yourself.

GET TODAY’S MORTGAGE RATES

With mortgage rates low, it’s an excellent time to consider a refinance — especially if you’re looking at the 15-year mortgage as a home financing option.

Get today’s live mortgage rates now. Rates are available online for free. No social security number is required to get started and there’s no obligation to proceed.

 

 

[“source-themortgagereports.com”]