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15-year mortgage rates chart shows where the savings are

Peter Miller
The Mortgage Reports contributor

15-year mortgage rate chart shows historical lows

Charts for 15-year mortgage rates have a great story to tell.

They show a way to cut interest costs by tens of thousands of dollars over the life of the loan.

15-year mortgage rates chart since 1991 — The Mortgage Reports

But while 15-year financing offers some important advantages, it’s often a financial afterthought.

Many home buyers never really investigate a 15-year loan because they assume the monthly payments will be too high.

But with mortgage rates at their lowest in three years, buyers and refinancers can now afford 15-year mortgages who couldn’t before.

Find a low 15-year mortgage rate today (Feb 16th, 2020)

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Average 15-year mortgage rates since 1992

Year Average 15-Year Rate Year Average 15-Year Rate Year Average 15-Year Rate
1990 n/a 2000 7.72% 2010 4.10%
1991 n/a 2001 6.50% 2011 3.68%
1992 7.96% 2002 5.98% 2012 2.93%
1993 6.83% 2003 5.17% 2013 3.11%
1994 7.86% 2004 5.21% 2014 3.29%
1995 7.48% 2005 5.42% 2015 3.09%
1996 7.32% 2006 6.07% 2016 2.93%
1997 7.13% 2007 6.03% 2017 3.28%
1998 6.59% 2008 5.62% 2018 4.00%
1999 7.06% 2009 4.57% 2019 3.39%

15-year mortgage rates vs. 30-year mortgage rates

Freddie Mac has been recording 30-year mortgage rates since 1971, and 15-year mortgage rates since 1992. And in that time, the average 15-year fixed rate has always been substantially lower than its 30-year counterpart.

15-year vs. 30-year mortgage rates chart since 1991 — The Mortgage Reports

Just looking at the past 10 years, 15-year rates have been about 0.7% lower than 30-year rates on average. That’s a huge savings margin for homeowners.

Year 30-Year Mortgage Rate 15-Year Mortgage Rate Difference
2010 4.10% 4.69% -0.59%
2011 3.68% 4.45% -0.77%
2012 2.93% 3.66% -0.73%
2013 3.11% 3.98% -0.87%
2014 3.29% 4.17% -0.88%
2015 3.09% 3.85% -0.76%
2016 2.93% 3.65% -0.72%
2017 3.28% 3.99% -0.71%
2018 4.00% 4.54% -0.54%
2019 3.39% 3.94% -0.55%

Find and lock a low 15-year mortgage rate (Feb 16th, 2020)

There are two reasons why 15-year mortgages have lower interest costs than 30-year financing.

First, the loan term is shorter. There’s less interest owed to the lender over time because the loan is being paid back more quickly.

Second, 15-year mortgages have substantially lower interest rates. A lower rate means you’re paying less in interest compared to your overall loan amount.

When you pair a shorter term and lower rate, the interest on a 15-year mortgage usually comes out to tens of thousands of dollars less than a 30-year mortgage of the same size.

Why are 15-year mortgage rates lower than 30-year rates?

Lenders offer lower rates for 15-year financing because shorter terms mean less risk.

Sometimes borrowers can’t make their payments because they lose their job, have a medical emergency, or experience another financial setback. There’s one-half the risk of such events happening over 15 years compared to 30.

Plus, debts are paid back quicker, so the lender has less cash outstanding. If something goes wrong the lender has less at stake.

So all in all, 15-year financing is a better deal for mortgage lenders. But it’s a somewhat riskier decision for mortgage borrowers.

15-year vs. 30-year mortgage payments

We say 15-year mortgages are “riskier” for borrowers than 30-year mortgages because the monthly payments are higher.

How is that true when interest is so much lower? It’s because you’re paying off the loan in half the time. So despite lower interest, you’re paying off a lot more of the principal (loan balance) each month.

Take a look at an example of a 15-year mortgage vs. 30-year mortgage on the same house:

  30-Year Fixed-Rate Mortgage 15-Year Fixed-Rate Mortgage
Loan Size $250,000 $250,000
Interest Rate 3.6% 3.0%
Monthly Principal and Interest Payment $1,130 $1,720
Total Interest Paid Over Loan Term $159,100 $60,800
Total Cost of Loan $409,100 $310,800

When rates are down, mortgage payments go down too. So 15-year mortgages are more affordable at today’s historically low rates than they have been in recent history.

But, if you don’t have a lot of budget flexibility, a 30-year mortgage probably makes more sense.

With a 15-year loan, your mortgage payment will take up more of your monthly budget. So if anything suddenly changes — say, you lose your job or have a large medical bill — the mortgage could quickly become unaffordable. A 30-year payment is lower and gives you a little more flexibility.

Of course, the right decision comes down to your budget and the rate you qualify for.

Check your loan options and rates here (Feb 16th, 2020)

Rates for 15-year fixed-rate mortgages (FRMs) versus 5-year adjustable-rate mortgages (ARMs)

When borrowers shop for mortgages they have many options. They can consider 30-year mortgages versus 15-year financing, as well as fixed-rate mortgages (FRMs) versus adjustable-rate mortgages (ARMs).

  • Fixed-rate mortgages (FRMs) lock in your interest rate for the entire length of the loan. Your mortgage rate and payment won’t change unless you refinance
  • Adjustable-rate mortgages (ARMs) lock in your rate for the first 5, 7, or 10 years. After that, your rate can rise and fall as the market moves. When your rate changes your payment also changes

If we look just at rates, ARMs will typically have much lower rates than 30-year financing, and slightly higher rates than 15-year financing.

At the start of 2020, 30-year mortgages were priced at 3.72%, 15-year financing was available 3.16%, and 5/1 ARMs were quoted at 3.46%.

The big difference is that, with an ARM, your rate could go lower after the initial fixed period. But it could also go higher. So there’s no guarantee you’ll save money.

ARMs and risk

Rates that change are not the same as steady rates. If rates can change it means they can go up or down. There is more risk for the borrower. There could be a situation where rates increase, monthly payments go up, and the borrower’s income goes down. That could create difficult circumstances for many households.

Although mortgage rates have generally fallen since the early 1980s, they could go up. It is this uncertainty which explains why ARMs can have competitive start rates but are generally not favored by borrowers. ARMs represented just 5.5% of all mortgage originations in December 2019 according to Ellie Mae.

What financial option is best for you? There’s no universal answer, everyone has different needs and preferences. For more information speak with loan officers and see what type of financing best meets your needs.

Lock in a low 15-year rate while they last

At the time of writing this article (early February 2020), rates are about the lowest they’ve been in three years. And 15-year rates are even lower than those for 30-year mortgages. So it’s a great time to lock one in.

If you think a 15-year mortgage is right for you, explore your options today. Low rates might not last for long.

Verify your new rate (Feb 16th, 2020)