How To Get One Of These Record Low 15 Year Mortgage Refinancing Rates

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How To Get One Of These Record Low 15 Year Mortgage Refinancing Rates

How To Get One Of These Record Low 15 Year Mortgage Refinancing Rates

In the days leading up to the pandemic, 15-year mortgages – with their usually tight monthly payments – were too expensive for many people. refinance your houses… Borrowers often simply took out another 30-year home loan, America’s mortgage.

But with the COVID crisis keeping mortgage rates low, even the 15-year option looked cheap. This is especially true now that 15-year rates are at an all-time low, according to the latest survey by mortgage giant Freddie Mac.

More borrowers are choosing short-term loans: 15-year mortgages accounted for 15.8% of all housing loans issued in May, up from 5.5% in May 2019, according to the latest data. City Institute

Here’s how to assess if a 15-year fixed rate mortgage is right for you – and how to get one of the lowest 15-year rates to date.

Today’s 15 Year Mortgages Provide Big Savings

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Average rates on 30-year fixed rate mortgages are deeply below 3% for now, reflecting investor concern that the delta variant of COVID-19 could torpedo economic recovery from the pandemic.

Thirty-year rates averaged 2.77% this week, not far from the typical early January of 2.65%, which was the lowest in the 50-year history of Freddie Mac’s weekly poll.

But the rates on 15-year fixed-rate loans are even cheaper and, in fact, are currently at an all-time low: just 2.10% on average.

Let’s be clear: due to the shorter maturity period, the 15 year mortgage will will give you a much higher monthly payment than a 30 year loan. But with 15-year rates at an all-time low, payouts will also be minimal.

Here’s an example of how you can save with a 15-year mortgage right now: In early August 2019, when the average for a 15-year fixed rate mortgage was 3.20%, a $ 250,000 loan would cost you $ 1,751 a month, or $ 21,012 per year

But at the current average rate of 2.10%, the same loan will cost you $ 1,620 per month, or $ 19,440 per year – for annual savings of about $ 1,600.

15 year mortgage vs 30 year loan

What’s more, a short term mortgage will set you back tens of thousands of dollars less of the total interest compared to a 30 year loan.

If you refinanced your $ 200,000 balance at current average rates, your monthly payment would be USD 1,296 with a 15-year loan, but only USD 819 with a 30-year mortgage – the difference is $ 477.

For some, this might be a hindrance, but when you consider the lifetime interest you’ll save on a shorter loan term, a high monthly payment isn’t all that bad.

The total interest you pay by refinancing a 15-year mortgage at 2.10% will be greater than USD 33,000, and you have to fork out for USD 95,000 interest on a 30-year loan – 2.77%. This is optional USD 62,000

Don’t forget that you will not only save over $ 62,000, but also pay off your debt in half the time.

Why Shorter Term Mortgages Have Better Rates

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The average interest rate on a 15-year fixed-rate mortgage is usually lower than the average for a 30-year loan because short-term loans are generally viewed by lenders as less risky.

However, since a 15 year mortgage requires higher monthly payments, the criteria required to obtain such a mortgage are often stricter than for a 30 year loan.

Ultimately, you may decide that the bar is too high, and you will have to look for other ways to cut housing costs – perhaps by shopping around to find lower rate on your homeowner’s insurance

Getting a 15-year mortgage may require increasing your income above what you currently earn, decreasing your debt-to-income ratio, or raising your credit rating. 200 points or more

How to Find the Best 15 Year Mortgage Rate

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To make sure you get the best 15 year refi rate, you need to check your credit rating before you start looking for offers.

You will need a rating in the range of “very good” (740 to 799) or “excellent” (800+) if you want lenders to be confident in working with you.

If you haven’t been keeping track of your account lately, it’s okay – you can easily check your account for free online and get tips on how to raise it if it’s low.

Once your credit score is in good shape, you will want to take a closer look and compare quotes of at least five lenders find the best loan offer for 15 years.

Research by Freddie Mac showed that comparing the five rates can save a borrower thousands of dollars over the life of the loan, so take your time with the first offer you get.

This article provides information only and should not be construed as advice. Provided without warranty of any kind.

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