If you want to pay off your mortgage fast and have the means to do so, a fixed-rate mortgage with a 15-year payback period might be a viable alternative. This calculator will help you determine if a loan with a 15-year term is feasible by giving you an idea of what your monthly payments will be like in such a scenario.
The 15-Year Mortgage Calculator: How to Use It
Use our 15-year mortgage calculator to discover how adjusting key parameters might affect your monthly payments. Your first steps involve determining the home's price, down payment amount, interest rate, and loan duration. To get a more accurate cost estimate, use the "more choices" button and fill in as much detail as possible.
Mortgage insurance premiums (MIP), homeowner's association dues (HOA), and other similar expenses should all be included. You should still factor these costs into your monthly housing budget, even though they aren't part of your mortgage payment.
After entering your data, you'll be sent to a page that details your monthly payments and an amortization plan that shows how your payments will be split between principle and interest.
Current 15-year Mortgage Rate Comparison
Comparison shop for the best mortgage rate and conditions by requesting quotes from various lenders. When comparing loans, it's important to consider more than just the 15-year fixed interest rate. It's important to compare annual percentage rates (APRs), which consider various mortgage-related expenses that aren't reflected in the interest rate alone.
Regarding closing charges and fees, certain financial institutions may be more cost-effective than others. If you're already a bank or credit union customer and find a better bargain elsewhere, don't be scared to switch.
Make sure you compare prices from both online and traditional banks. Think about working with a mortgage broker who acts as an intermediary between borrowers and banks and has access to rates from wholesale lenders.
Pluses of a Mortgage with a 15-Year Term
The benefits of a 15-year mortgage vs a 30-year mortgage are outlined below. Throughout their respective periods, both the interest rate and the monthly payment remain constant.
Decreased Cumulative Interest There is a saving in interest throughout the life of a 15-year mortgage compared to a 30-year loan. Since the cost of a mortgage depends on an annual interest rate, extending the loan term to 15 years would result in a lower interest payment than a 30-year mortgage over the same amount of time.
To Reduce Interest Rates
A 15-year mortgage normally has a lower interest rate than a 30-year one since short-term loans are less risky to finance for banks than long-term ones. This rate can be a whole point lower than the 30-year mortgage.
Fannie Mae
The expenses associated with a 15-year loan are often lower since government-sponsored organizations like Fannie Mae buy mortgages from borrowers. Loan-level price adjustments are fees levied by Fannie Mae and other government-backed corporations, and they are often exclusive to or more expensive for 30-year mortgages.
The Drawbacks of a 15-Year Mortgage
Borrowers should weigh the benefits of a 15-year mortgage vs the costs associated with other loan terms before making their final choice.
Higher Monthly Payments
A 15-year mortgage has greater minimum repayments than a 30-year as the loan needs to be paid in approximately half the time. For illustrate, a 15-year credit for $250,000 at 4% interest has a minimum repayment of $1,849 against $1,194 for the 30-year. In other words, for the same principal and interest rate, the 15-year monthly payment is 55% greater than the 30-year payment.
Less Affordability
Compared to a 30-year loan, the greater payment may force the buyer to settle for a less expensive home. A $200,000 mortgage at 4% for 15 years would result in a $1,479 payment, so the borrower would have to settle for a smaller home.
Example of a 15-Year Mortgage
A mortgage amount of $250,000 over 30 years at a rate of 4% would cost $429,674 in principle and interest payments towards the conclusion of the loan, and the total interest would be $179,674 for borrowing for 30 years. The identical loan amount and interest rate for 15 years would cost $332,860 towards the period's conclusion.
The total interest would be $82,860 for borrowing for 15 years. At 4%, you'd pay just around 46% of the total interest for a 15-year than you'd pay for a 30-year loan. The greater the interest rate, the more dramatic the discrepancy between the two mortgages. 6
