In addition to 30 year fixed rate mortgages, lenders also offer 15 year fixed rate mortgages. Just like their longer term counterparts, 15 year fixed rate mortgages have a fixed interest rate over the life of the loan. When borrowers opt for this type of loan, they can be assured that their interest rate and principal payment will remain unchanged over the life of the loan. This feature can be very beneficial to home buyers that have a fixed budget and desire the security of a fixed interest rate. Before choosing a 15 year fixed rate mortgage, borrowers should determine if this type of loan will meet their needs based on their financial situation. While the interest rates on 15 year fixed rate loans are lower than those of 30 year fixed rate loans and potentially even adjustable rate mortgages, the monthly payments on these loans are generally higher.
15 Year Fixed Rate Mortgage Borrower Demographics
There are two distinct groups of home buyers among whom 15 year fixed rate mortgages are popular. The first group is young home buyers. Young home buyers with sufficient income to meet the higher monthly payments often choose 15 year fixed rate mortgages over other types of home loan financing. With a 15 year fixed rate mortgage, these young couples are able to pay off their home more quickly providing them the opportunity to pay off their home before their children are college age. The second group is well established, older adults. This group has a higher income, and their desire is to have their home loan paid-in-full prior to their retirement. These two groups are not the only groups of people that can benefit from a 15 year fixed rate mortgage, but these groups tend to utilize this type of loan more than others.
Benefits of 15 Year Fixed Rate Mortgages
There are several benefits to choosing 15 year fixed rate mortgages. These types of loans make it possible for borrowers to own their home in half the time of traditional 30 year fixed rate mortgages. Borrowers that opt for this type of loan will also save more than half the amount of interest they would pay with a 30 year fixed mortgage as well. Not only will borrowers of this type of loan enjoy a fixed interest rate for the life of the loan, but they will also enjoy a lower interest rate than those opting for more traditional loans. Furthermore, 15 year fixed rate mortgages can be insured by both the Federal Housing Administration (FHA) and Veterans Administration (VA). For those home buyers that can afford these types of mortgages, 15 year fixed rate mortgages are an excellent option.
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