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Pros and cons of 15 year fixed mortgage rates

A fixed rate mortgage, otherwise called a fixed rate or a fixed loan, is a loan you take out for a mortgage where the rate of interest does not change for the duration of the loan. An interest rate is what you have to pay a lender for getting a loan from them. A fixed rate mortgage locks in on this particular payment during the time you take to pay the loan back regardless of fluctuations in the market. Naturally, what makes fixed rates attractive is that they are not subject to change whether these are 15 year fixed mortgage rates or 30 year fixed mortgage rates.

15 year fixed mortgage rates or 30 year fixed mortgage rates refer to the number of years you fix on to pay your mortgage loan off. These two are the most common types of fixed rate mortgage rates. You can choose the kind of fixed rate you prefer, after taking a look at how long you will need to pay off the loan, how long you plan on living in a particular area and other such reasons. Of course, all kinds of fixed rates have their advantages and disadvantages.

Thanks to the Federal Reserve’s interest rates hike, mortgage rates have risen in the U.S. 15 year fixed mortgage rates save interest in the long run. For example, when refinancing a mortgage 15 year fixed rate mortgages save money in two possible ways. One, a 15 year fixed rate mortgage has an interest rate that is three quarters lower than a 30 year fixed rate mortgage. Short term loans are less risky and cheaper for banks to fund. Two, you, naturally, pay interest for a shorter time. It does seem obvious until you see the difference between paying 360 loans and 180 loans to get you mortgage free. Surprisingly, this difference can sometimes go into tens of thousands of dollars.

The cost of mortgage rate is usually calculated as interest rates that are annual. Since you are borrowing money only for 15 years, when compared to thirty years, you will be borrowing less than half the amount typically. If the interest rate is higher, there will be a bigger gap between the 15 and 30 year fixed rate mortgages. If your mortgage has been bought by a government-backed company like Fannie Mae, a 15 year fixed rate mortgage will cost you less in fees. Government sponsored companies charge a loan level price adjustment that is more for a 30 year fixed rate mortgage than a 15 year one. This price adjustment is given to borrowers with a low credit score or a low down payment. The Federal Housing Administration charges people who avail a 15 year fixed rate mortgage lower mortgage insurance premiums.

A 15 year fixed mortgage rate also has two possible drawbacks. One is that the monthly loan payment is more than what you have to pay for a 30 year fixed mortgage rate. Two, when you have a financially difficult month, it boxes you in. You do not have much flexibility to maneuver through the payment. With a 15 year fixed mortgage rate, your monthly payments are at the lowest they could be, the very minimum. The monthly loan amount cannot go lower than that. So if you are short of money, you are in trouble. 15 year mortgage rates lock you into higher monthly payments that can put a squeeze on you when finances are low.

Some of the banks that offer the lowest rates for a 15 year fixed rate mortgage. Those include Farmers Bank of Milton in Milton, Kentucky that offers an interest rate of 3%; Westport Federal Credit Union, with its headquarters in Westport, Massachusetts, that offers a 3% rate of interest; Mid America Bank & Trust Co. with its headquarters in Dixon, Missouri, that offers an interest rate of 3%; Fond Du Lac Credit Union, with its headquarters in Fond Du Lac, Wisconsin, which offers an interest rate of 3%; and Army Aviation Center Federal Credit Union, with its headquarters in Daleville, Alabama, which offers an interest rate of 3%.

15 year fixed rate mortgages require a refinance that is up to 97% of the value of your primary home and a primary home that is bought with a down payment that is as low as 3%. The loan payment you pay every month will be decided based on the rate of your interest, the principal loan amount and a fixed interest over 15 years. This interest is not subject to change till you pay the loan off. What you pay for the total loan amount depends on your circumstances and the rate of interests at the time you apply. You can pay a 15 year fixed mortgage rate at any time without fearing prepayment penalties.

15 year fixed mortgage rates are considered to be a good option whether you are looking to purchase a primary home, a vacation home, or a refinance.

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