Similar to the 30 year fixed rate mortgage, a 15 year fixed rate mortgage is a loan where the interest rate stays the same for the 15 year period. With the 15 year loan you will generally pay a lower interest rate, meaning less interest paid over the duration of the loan, allowing you to grow your equity faster than other loans with longer terms.
Fixed rate mortgages are usually amortized, meaning your payments are made up of the interest and principal. With the 15 year fixed rate mortgage, the loan is fully amortized, or paid off, by the end of the 15 year period.
A 15 year fixed rate mortgage allows you to build equity fairly quickly. This type of mortgage is only 15 years instead of the more popular 30 year fixed rate. The 30 year fixed rate is more popular than the 15 year fixed rate because the monthly payments are higher with the 15 year fixed rate. However the 15 year can provide you many pros over the 30 year if you can afford it.
- less term
- lower rate
- less risk
- Build equity faster
Important factors to consider
When choosing a loan it is important to take into consideration the amount of time you plan on staying in the house. If you are considering to move within a few years the higher monthly payments of a 15 year mortgage may not be worth it. You will be paying more interest even though you will not keep the loan for long.
Before going with a 15 year fixed rate mortgage, be aware of the fact that although you will benefit from a lower interest rate you will have higher monthly payments. If you can afford a higher monthly payment and want to build equity faster, a 15 year fixed rate mortgage could be right for you.