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For several months, interest rates on 15-year mortgage loans were between 6% and 6.5%. But things started to shift in August — rates have dropped by 72 basis over the last month and a half as economists have anticipated the Federal Reserve cutting the federal funds rate at its Sept. 18 meeting. The 15-year fixed mortgage rate is now 5.27%, according to Freddie Mac.
The Fed did decrease the fed funds rate at its Wednesday meeting. Now we’ll see how that announcement is reflected in Freddie Mac’s weekly mortgage rate data, which it will release Thursday at noon ET.
Those lower rates mean more affordability when buying a home, and they can significantly reduce the long-term interest you’ll pay on your mortgage. Here’s what to know about 15-year mortgage rates and what they mean for your budget.
Read more: How and when to lock in your mortgage rate
In this article:
15-year mortgage rates today
According to data from government-sponsored enterprise (GSE) Freddie Mac, the average 15-year mortgage rate is now 5.27%. That’s down 20 basis points from last week’s 5.47%, down from the August high of 5.99%, and significantly lower than the 7.03% rate seen last autumn. It’s also well below the 52-week average of 6.21%.
Here’s what today’s 15-year rates mean for monthly payments on a $400,000 mortgage loan (which is just below the median home sale price in the U.S.).
At today’s rates, you’d save about $382 per month compared to the 12-month high and $201 compared to the 52-week average. Remember that the above amounts refer to mortgage principal and interest payments and do not include homeowners insurance, property taxes, mortgage insurance, and other escrow costs that can change over time.
Learn more: How PITI (principal, interest, taxes, insurance) affects your mortgage payments
Current 15-year mortgage and refinance rates
Here are the current 15-year mortgage rates, according to Zillow data. You can compare them to rates on other terms and types of home loans. The following are the interest rates for home purchases:
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15-year fixed conventional: 4.86%
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15-year fixed VA: 4.57%
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15-year fixed FHA: 4.25%
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30-year fixed conventional: 5.58%
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30-year fixed VA: 4.97%
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30-year FHA: 4.66%
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20-year fixed conventional: 5.38%
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5/1 ARM conventional: 5.99%
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5/1 ARM VA: 5.58%
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5/1 ARM FHA: 4.69%
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7/1 ARM conventional: 6.00%
Here are the current 15-year refinance rates:
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15-year fixed conventional: 4.85%
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15-year fixed VA: 4.86%
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30-year fixed conventional: 5.55%
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30-year fixed VA: 5.00%
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20-year fixed conventional: 5.29%
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5/1 ARM conventional: 5.99%
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5/1 ARM VA: 5.19%
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5/1 ARM FHA: 4.58%
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7/1 ARM conventional: 6.01%
Though not always the case, refinance rates tend to be higher than purchase rates. Today’s 15-year fixed conventional rate is down 14 basis points since last week, and the 15-year fixed refinance rate has dropped by 41 basis points.
Read more: Is now a good time for refinancing your mortgage?
15-year mortgage rate calculator
A mortgage calculator can help you determine what today’s rates mean for your budget and home-buying goals. It can also help you zero in on what price range to focus on, how much you should save for a down payment, and what you can expect to pay in escrow costs (which you’ll pay monthly in addition to your principal and interest payments.)
Read more: How much do you need for a down payment on a house?
Pros and cons of 15-year fixed-rate mortgages
A 15-year loan isn’t right for everyone. (In fact, 30-year mortgages are much more popular). But they can be a good fit for home buyers with certain situations and financial goals. Here are the pros and cons to think about before taking out one of these loans:
Pros
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Low interest rates: Due to its shorter term, a 15-year mortgage rate is almost always lower than a 30-year mortgage rate. This can save you significantly on interest over the life of the loan.
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Fast equity build-up: You’ll start whittling down your principal balance faster because your loan term is fairly short. This means more equity on a quicker timeline, which can help you cancel private mortgage interest (PMI) sooner or borrow more with a HELOC or home equity loan down the road.
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Pay off your mortgage faster. With a 15-year term, you’ll own your home outright much sooner than if you choose a longer term.
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A steady payment: As long as you choose a fixed-rate mortgage, you’ll have the same monthly payment toward interest and the principal for your entire loan term. This can make for easier household budgeting.
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Tax perks: You can write off the interest you pay on mortgage loans — up to $750,000 — as long as you itemize your annual tax returns.
Dig deeper: Mortgage interest tax deduction — How it works and when it makes sense
Cons
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Higher monthly mortgage payments. Because your balance is spread across fewer months on a 15-year mortgage versus a 30-year one, you’ll have higher monthly payments. This could put a strain on your budget.
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Smaller home-buying budget: The higher monthly payments could limit your home-buying options, forcing you to buy a lower-priced house than you might have been able to afford with a 30-year mortgage.
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Less cash flow: Since 15-year mortgages have higher payments, it could mean less monthly cash flow. This may limit your other financial and investment opportunities.
How to get the best 15-year mortgage rate
The interest rates noted above are nationwide averages, and the rate you’ll get on a 15-year loan might not be the same. Mortgage lenders base interest rates on many factors, including your location, credit score, loan amount, down payment, and other financial details.
If you want to get the lowest mortgage rate possible, follow these tips before applying for your loan:
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Increase your credit score: A higher credit score equals a less risky borrower in the eyes of a mortgage lender. Lenders reward that lower risk with better interest rates.
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Increase your down payment: The same goes for down payments. The larger the down payment, the lower your rate should be, as it means the lender has to loan you less money.
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Choose your lender carefully: Mortgage lenders vary quite a bit on rates and fees. In fact, Freddie Mac estimates that getting four different rate quotes can save you about $1,200 per year.
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Purchase points: You can buy mortgage points — also called discount points — when closing on your loan. These allow you to pay an up-front fee for a lower mortgage rate on your loan. You’ll usually pay about 1% of your loan amount per point.
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Use a buydown program: Some lenders, such as Rocket Mortgage and Pennymac, offer temporary mortgage rate buydowns, which give you a reduced interest rate for the first year or two of the loan.
Using a mortgage broker can help too. These independent mortgage professionals work with you to compare various lenders, loan programs, and rates to ensure you’re getting the best fit for your needs and budget. They’re typically paid via lender-side commissions.
Dig deeper: How to buy down your mortgage interest rate
15-year mortgage interest rate vs. APR
When comparing mortgage lenders, you might notice two different advertised rates: an “interest rate” and an “APR.” And while the two numbers can both help you understand a loan’s costs, they’re not one and the same.
The interest rate on a mortgage is pretty simple. It’s the interest you’ll pay each year to borrow the money, and it plays a significant role in determining your monthly payments.
APR (annual percentage rate), is the total yearly cost of the loan. In addition to interest, it also considers discount points, fees, and other lender charges. It’s a more comprehensive look at a loan’s annual costs. Interest rates are important, but comparing APRs between lenders can help you understand which is truly the most affordable.
Learn more: When will mortgage rates drop?
15-year mortgage rate FAQs
What is the interest rate for a 15-year mortgage right now?
According to Freddie Mac, the average 15-year mortgage rate is 5.27%. Rates fluctuate daily, and Freddie Mac updates its rate data every Thursday.
Is a 15-year mortgage cheaper?
In the long term, a 15-year mortgage will cost you less in interest than a 30-year mortgage will. It does come with a higher monthly payment, though.
What is the lowest 15-year mortgage rate ever?
The lowest 15-year mortgage rate on record was 2.10%, according to Freddie Mac. This rate occurred two weeks in a row, in July and August 2021.
Is it cheaper to pay off a 30-year mortgage in 15 years?
Paying off your 30-year mortgage in 15 years is not necessarily cheaper than getting a 15-year mortgage in the first place because 30-year loan rates are higher. But taking this approach to pay your mortgage off faster gives you more flexibility in case you can’t afford to pay extra for a month or year. Just make sure your lender does not have prepayment penalties for paying off your loan early.
This article was edited by Laura Grace Tarpley.