Buyers and refinancers are likely to continue chasing 15-year mortgages as the shorter-term loans hit another record low average rate. The average rate on a 15-year fixed mortgage came in at 2.46 percent this week, beating out the previous record of 2.47 percent earlier this month.
It’s the continuation of a trend, as rates on 15-year mortgages have been well below 3 percent for months, and rates on longer-term loans and other mortgage products have been favorable to buyers and refinancers, too.
The 15-year mortgage has been popular with homeowners lately.
Data from the Mortgage Bankers Association show that there were 38.4 percent more 15-year mortgage applications (both for refinances and new purchases) in the week that ended Oct. 2 compared with the same week in 2019.
A big reason borrowers are attracted to 15-year mortgages is the potential for long-term savings. Shorter-term loans have less time to accrue interest than longer ones, like the 30-year benchmark mortgages, and 15-year loans usually have lower interest rates to begin with. That means, over the life of the loan, 15-year borrowers wind up laying out far less cash than 30-year mortgage holders do. That savings can be difficult for some borrowers to take advantage of though, because 15-year mortgages usually have much higher monthly payments than longer-term loans.
How much can you save with the 15 versus a 30? On a $300,000 mortgage, the savings in interest amounts to nearly $100,000. Of course you’ll have to make higher monthly payments with the 15, but more people are happy to make the trade.
Thanks to the current low interest rates, 15-year mortgages have become a more attainable and attractive option for many borrowers.