The average rate on a 15-year fixed mortgage fell to a record low this week of 2.42 percent in Bankrate’s weekly survey.
More borrowers than ever have been able to take advantage of the savings that come with a shorter-term mortgage, thanks to months of historically low rates.
Borrowers pay less interest over the life of a 15-year mortgage compared to the more common 30-year loans thanks to the shorter loan period. And, 15-year mortgages usually have lower interest rates overall. But, they also usually have higher monthly costs than comparable longer-term loans, because the principal must be paid back in a shorter amount of time.
Low interest rates have reduced the monthly outlay for many borrowers, which has made these shorter loans more feasible for an expanding number of homeowners.
At today’s interest rates, borrowers with a $300,000 mortgage would save around $100,000 in interest overall by taking out a 15-year loan instead of a 30-year one.
It’s unlikely that these low interest rates will last forever though, so now may be the best time to shorten your loan term to take advantage of the lower monthly costs. Once rates start rising, those payments may become prohibitive.