What are 15 Year Fixed Mortgages?
A 15 year fixed rate mortgage is a home loan where the interest rate remains the same for the whole term of the loan. Paydown for a 15 year fixed rate mortgage home loan is half as compared to a 30 year fixed rate mortgage.
The key element of this type of home loan is fixed monthly payments; even if there is a change in the interest rates it won’t affect your monthly payments. A 15 year fixed rate mortgage is for those home buyers who are on the lookout for shorter home loans, and can afford high monthly payments.
What are the benefits of getting a 15 Year Fixed?
For the entire loan, you know what you have to shell out as a monthly payment. So, there’s no fear of rate fluctuations. You can save thousands of dollars in the form of interest rates if you take out a 15 year fixed rate mortgage. On the other hand, if you get a mortgage for a bigger duration you are stuck with it. A 15 year fixed rate mortgage is a better deal.
Since you pay your mortgage in 15 years, you can build equity in your home faster. Also, payments are amortized during the loan, which means every month you are paying principal and interest amounts.
A 15 year fixed rate mortgage is ideal for first time home buyers since it allows them to pay 5% as down payment of the house. And if you are thinking of refinancing, with a 15 year fixed rate mortgage you can refinance your home up to 95% of the home’s value.
Who qualifies for a 15 Year Fixed?
Before entering a 15 year fixed rate mortgage, it’s imperative to study the pros and cons. It’s a little hard to get qualified for a 15 year fixed rate mortgage. Monthly payments are higher compared to a 30 year fixed rate mortgage. Therefore, in order to be eligible for a 15 year fixed rate mortgage, your gross monthly income should be high to satisfy the lender that you can afford this home loan.
Also, if your credit score is 720 or above, chances of getting low interest rates are higher, thus making your monthly payment affordable for you. Not only this, a good credit score makes the mortgage approval for your home loan faster.
Don’t rush to get a 15 Year fixed rate mortgage. Try various lenders or banks to get the lowest rates.