If you’re a potential homebuyer, you probably have plenty of questions about the path to homeownership. From finding a house to choosing a mortgage lender or broker, you want to be sure you’re making the right choice for you.
One of several things to consider when selecting a mortgage product is the term length. Typically, with a shorter-term mortgage (like a 10-year or a 15-year loan), you’ll have a higher monthly payment but a lower interest rate.
Current mortgage rates
Rates are effective 01/26/2022 and are subject to change without notice. APR shown is provided by a partner of ConsumerAffairs.
The APR shown of 2.853% is available for a 15-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.
The APR shown of 3.775% is available for a 15-year FHA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.
The APR shown of 3.053% is available for a 15-year VA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.
The APR shown of 3.801% is available for a 30-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.
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Mortgage rate trends today
Mortgage rates have been unsteady since the beginning of the COVID-19 pandemic, starting at an average of about 3.75% on a 30-year fixed-rate mortgage in January 2020 and hitting an all-time low of 2.65% in January of 2021, according to the Federal Reserve Bank of St. Louis. As of Dec. 23, 2021, the average rate is 3.05%.
Most experts agree that though mortgage rates have remained low over the past year, they’ll increase in 2022 as the economy continues to recover. The actions of the Federal Reserve, the central U.S. bank, will have the biggest effect on rates as it begins scaling back monetary support. You can expect 15-year mortgage rates to stay lower than 30-year rates, however.
Benefits of refinancing to a 15-year mortgage
By refinancing to a 15-year mortgage, you can often take advantage of lower interest rates and pay less in borrowing fees over the life of the loan. Rates continue to remain at levels not seen over the past 40 years.
By refinancing, you pay interest over fewer years and build equity in your home faster. It’s possible your monthly payment could stay around the same or even be reduced. (Usually, however, it results in a higher monthly payment if you're shortening your loan term.)
In deciding whether the monthly payment on a refinance works for you, you might use the 28/36 rule that's recommended by many experts. This rule of thumb advises against mortgage payments and housing expenses higher than 28% of your pretax income and total debt of more than 36% of pretax income. It’s also helpful to have at least three to six months of living expenses saved in an emergency fund as well.
15-year mortgage FAQ
- Is it worth it to refinance to a 15-year mortgage?
- The short answer: It depends. Whether it's worth refinancing to a 15-year mortgage varies based on your financial situation and how much you can comfortably afford to pay monthly. You should also consider how long you plan to own your current home — it may not be worth refinancing if you have plans of selling soon. Remember that refinancing does have fees associated with it.
You can always explore your refinance options without locking yourself into an agreement. Gather quotes from reputable lenders and think about how the new monthly payment will impact your budget both now and in the future. When you’re researching options, it’s smart to start with your current mortgage lender, as it may offer incentives (like lower fees) to keep customers who have a history of paying on time.
- How are mortgage rates set?
- Lenders set their own mortgage rates. The interest rates they offer depend on factors unique to the applicants, like credit scores, as well external factors, like the actions of the Federal Reserve.
- How often do mortgage rates change?
- Mortgage rates change daily. Because of this frequent fluctuation, experts warn potential borrowers not to “time the market” or attempt to predict when the best time to buy or refinance a home will be in the future.
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