7 things to remember about 15-year mortage loans

If you're comparing fixed-rate mortgage loan products for a home purchase or refinance, you may be wondering if it makes sense to get a 15-year home loan. Consider some of the following things when evaluating 15-year mortgages.

1. The shorter the mortgage term, the faster your home will be paid off. Decide how important it is to own your home free and clear. If you want to pay off your house as quickly as possible, it may make sense to apply for a mortgage with a 15-year term.
2. You'll pay less interest over the life of a 15-year mortgage than with a 30-year loan. That means you'll save thousands of dollars in interest payments. A shorter loan term is going to allow you to keep more of your hard-earned money in your pocket.
3. A 15-year mortgage loan is going to have higher payments than a 30-year loan. So it's important to make sure you have a stable income to make monthly mortgage payments. Mortgage underwriters analyze your financial situation to make sure you have enough income for the type of mortgage you want.
4. The lowest mortgage rates for 15-year loans are typically about half a percent lower than those of 30-year loans.. For instance, 15-year fixed mortgage rates were recently at 3.82%, compared with 4.37% for 30-year mortgages. The better your credit score, the better the mortgage rate you will be offered.
5. Refinancing into a 15-year mortgage loan could be a smart move if you've been paying on your home for a while. It may not make sense to refinance into a 30-year mortgage if you've paid down a good amount of your principal. A 15-year loan can allow you to take advantage of lower interest rates without extending your term.
6. Refinancing into a 15-year mortgage could result in much higher monthly payments if you haven't paid down much principal on your current loan. Make sure you have enough income to make the higher payments over the life of the loan. If you aren't sure you'll be able to handle a higher mortgage bill each month, consider refinancing into a 30-year mortgage to take advantage of lower interest rates, but make additional principal payments.
7. Refinancing your mortgage could allow you to get rid of mortgage insurance (MI) payments. Having at least 20% equity in a home means you won't have to pay MI. But if your home has lost a lot of value you could end up paying MI if you don't have at least 20% equity when you refinance.

Shop around for mortgages

Take time to compare different loan products to find the right mortgage, whether it is a 15-year or 30-year loan. Whether you are buying a home or refinancing, it's important to understand all the terms and conditions of the mortgage you choose. Work with a mortgage broker who is willing to explain the various options available to you.