Today's Fifteen Year Mortgage Rates
When looking to purchase a home, many people choose a 15 year mortgage over other mortgage products. Since the loan will be paid down more quickly than other mortgage products, it is often preferred by mortgage lenders. Because of this, a 15 year mortgage comes with a fixed payment and lower interest rates than other mortgage products.
Comparison to Other Mortgage Products
While a 15 year mortgage is one of the more popular mortgage products, there are several other mortgage products which are available. A 15 year mortgage can be compared to the following mortgage products:
- 30 year mortgage – The 30 year mortgage is the most frequently accepted mortgage product. Like the 15 year mortgage, the 30 year mortgage has a fixed payment over the life of the mortgage. The main difference is that the 30 year mortgage is paid over a period twice as long, which leads to lower monthly mortgage payments. However, the 30 year mortgage always comes with a much higher interest rate which ranges from 0.50% to 0.75% higher than a 15 year mortgage.
- Adjustable Rate Mortgage (ARM) – Another common mortgage product is an adjustable rate mortgage. With an ARM a borrower receives a low initial interest rate and fixed payment for a set period of time, which normally ranges from 1 to 7 years. After the initial period, the interest rate adjusts to a different rate, which can be unaffordable for some people. Depending on the length of the initial interest rate period, an ARM will come with an interest rate of 0.25% to 0.50% below a 15 year mortgage interest rate.
- Jumbo Mortgage – A jumbo mortgage is a mortgage that is designed to finance more expensive homes. A jumbo mortgage is required for any mortgage balance that exceeds $417,000, although it was raised to $729,000 temporarily. Since jumbo mortgages provide more risk to the bank, they often come with higher interest rates. A 15 year jumbo mortgage will come with an interest rate of 1% above a traditional 15 year mortgage.
What Affects Mortgage Rates
Like all mortgage products, the best time to get a 15 year mortgage is when interest rates and fees are low. Interest rates are affected by a few different factors. The main factor which affects mortgage interest rates is supply and demand. Supply and demand is a basic economic principle which affects almost all everything in a free market economy. In a good economy, interest rates tend to be higher because more people can afford to purchase a home and the demand for mortgages increases. In a poor economy, mortgage rates tend to be lower because less people are looking to purchase a home which leads to a lower overall demand for mortgage.
Mortgage rates can also be affected by governmental actions. In the past, the federal government has invested heavily in Freddie Mac and Fannie Mae so the two mortgage giants would keep their interest rates low. Also, in situations when an economy is improving, the federal government is forced to increase federal interest rates to prevent drastic inflation. Increasing federal rates has an indirectly will increase mortgage rates.