15-year refinance rates: Pros, cons and current lenders offers
Updated 3:37 PM EDT, Wed September 18, 2024
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The average fixed 15-year refinance rate was 5.27% in mid-September, remaining well below the 7% peak reached in November 2023.
If you want to lower your mortgage rate, change loan terms or tap into home equity, you may be considering a 15-year refinance. But like most homeowners contemplating such a move, you might question if this is a good time to refinance.
It’s looking better and better: The Federal Reserve announced on Sept. 18 that it was decreasing the federal funds rate (which mortgage rates track) by half of a percentage point (or 50 basis points) — and signaled plans to keep trimming it through the end of 2025.
With rates expected to decline, refinancing to a 15-year mortgage from a longer term can reduce your total loan cost, build home equity faster and pay off your loan quicker. However, with higher monthly payments than longer terms, it might strain your budget over time. Consider the pros and cons of a 15-year refinance and its short- and long-term impact on your finances to determine whether it’s a good choice.
Current 15-year refinance rates
Related >> 10-year refinance rates | 30-year refinance rates | VA refinance rates
Mortgage rates fluctuate daily due to multiple factors. Economic influences such as the federal funds rate (the interest rate at which banks lend to each other), inflation and activity in the bond market all play a role in the trend line. Besides economic factors, personal circumstances such as your creditworthiness, income, debt and home equity also impact your interest rate.
Example: If you refinanced a $200,000 mortgage balance at 6.44% with a 15-year fixed-rate refinance loan, you would pay $1,736 monthly in principal and interest. A mortgage calculator can help you compare monthly payments on various loan terms.
| Fixed term (years) | Interest rate* | Monthly payment | Total interest | Total repayment |
|---|---|---|---|---|
| 15 | 6.44% | $1,736 | $112,412 | $312,412 |
| 20 | 7.07% | $1,559 | $174,163 | $374,163 |
| 30 | 7.30% | $1,371 | $293,611 | $493,611 |
Related >> 15-year vs. 30-year mortgage: Which is best for you?
Rates and trends in different states
Your home’s location is another factor that influences your potential 15-year refinance rate, as mortgage lenders establish APRs partially based on state foreclosure statistics, state laws and other location-specific data. These factors can cause mortgage rates in some states, and in turn, home affordability, to be higher or lower than the national average.
ICE Mortgage Technology used mortgage payment-to-income ratios to determine affordability by state in its November 2023 report:
| Most affordable housing markets | Least affordable markets |
|---|---|
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Tip: The Consumer Financial Protection Bureau’s interest rate tool can give you an idea of current 15-year refinance rates in your state.
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Lenders that offer 15-year mortgage refinance rates
Many of these financial institutions were featured in our list of the best mortgage refinancing lenders.
| Lender | Lowest 15-year fixed APRs |
|---|---|
| Bethpage Federal Credit Union | 5.521% |
| Guaranteed Rate | 5.925% |
| Better | 6.464% |
| Discover | 6.290% |
| SoFi | 5.266% |
| Chase | 5.399% |
| loanDepot | Undisclosed |
| AmeriSave Mortgage | Undisclosed |
Related >> How to choose a mortgage lender
3 key eligibility criteria for 15-year refinance rates
1. Credit scores
The higher your credit scores when applying for a 15-year refinance, the more competitive the mortgage interest rates you’ll receive.
Borrowers with credit scores of 740 or above typically get the lowest mortgage rates and see the most monthly payment savings, according to data from the Consumer Financial Protection Bureau. But this varies by lender: Guaranteed Rate, for example, says that you need scores of 760 to access its lowest APRs.
Related >> What credit scores do you need for a mortgage?
2. Debt-to-income ratio
Lenders closely analyze your debt-to-income (DTI) ratio, said Italia Parisi, a South Carolina-based loan officer.
DTI is the sum of your monthly debt payments divided by your gross monthly income, expressed as a percentage. Lenders have maximum limits on the front-end DTI, which includes the monthly mortgage payment only, and the back-end DTI ratio, which accounts for all monthly debt payments (including the new mortgage).
With persistently high mortgage rates and home prices, qualifying for a mortgage based on DTI ratio has become increasingly difficult, Parisi said. That means you’ll ideally have a “very minimal” amount of debt outside of the new 15-year mortgage payment.
3. Loan-to-value ratio
The loan-to-value (LTV) ratio is the loan amount you’re borrowing divided by the home’s appraised value. Most conventional lenders require you to maintain 20% equity in your home after the refinance, regardless of the new loan term.
“Someone that's going to refinance and hold 20% of their equity, the interest rate is going to be a little bit higher than someone that only needs to refinance 50% of their equity,” said Parisi. “So, keep the loan-to-value in mind when you're going into any term, but going into a 15-year [loan]... that makes a difference.”
6 steps to refinance your mortgage into a 15-year term
1. Identify the purpose of refinancing. Be clear about what you want to achieve. Is your goal to lower your interest rate? Pay off the home faster? Access equity? Knowing your refinance goals will ensure you’re making the right choice.
2. Confirm that a 15-year term is right for you. See if it fits your financial goals and budget by running your numbers through a mortgage refinance calculator.
3. Check your credit. This is always a good idea before applying for a loan. Order your credit reports for free at AnnualCreditReport.com and monitor your scores via your financial institution, credit card issuer, the credit bureaus or third-party services.
As you proceed through the refinance process, maintain or improve your credit by keeping an on-time payment history, reducing other debts and avoiding new credit.
4. Compare refinance loans. Rates and fees vary by lender, so shop around to get the most competitive mortgage terms. Request at least three quotes, ideally on the same day, from different types of lenders (traditional banks, credit unions and online companies).
Review the APRs and any excluded fees to make apples-to-apples comparisons. Additionally, consider negotiating fees and rates, as some lenders may match quotes.
5. Choose a lender and submit your paperwork. Expect to provide much of the same documentation you supplied when you got your current mortgage: recent pay stubs, federal tax returns, W-2 forms, bank statements and other financial documents. If your lender provides the option, consider locking in the loan rate to prevent any increases before closing.
6. Close on the loan. After applying, your loan will enter the mortgage underwriting process. Your lender will order a home appraisal or other valuation and confirm your financial information. You’ll receive a closing disclosure with the final mortgage details and closing costs before the closing date.
Related >> How much does it cost to refinance a mortgage?
If you’re doing a cash-out refinance, you’ll receive the funds on closing day. Expect the refinance process to take between 30 and 60 days, although some loans offer a streamlined option that reduces the time.
Pros and cons of a 15-year refinance
| Pros | Cons |
|---|---|
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“If a borrower is comfortable with the higher payment amount, a 15-year mortgage can save a borrower a significant amount of interest over the life of a loan,” said National Association of Mortgage Brokers president Valerie Saunders. That savings, which can amount to hundreds of thousands of dollars, will free up money for other financial goals in the future. Moving to a 15-year loan could also reduce your interest rate, depending on your current terms.
While a shorter term will help you realize the dream of owning your home free and clear in half the time as a 30-year mortgage, the higher monthly payments leave less wiggle room for achieving competing financial goals, such as investing, saving for retirement or funding college expenses. The hefty monthly dues also mean stricter loan requirements.
When to consider a 15-year refinance
While mortgage interest rates have fluctuated in recent months, current 15-year refinance rates remain around the 6% mark, and most homeowners have rates below that — 92%, according to a June 2023 report by Redfin.
If the primary reason for refinancing is to lower your interest rate, that goal may be challenging in today’s market unless you recently secured your mortgage at a higher rate.
Of course, some scenarios (besides reducing your rate) warrant a refinance. And in other cases, it may be best to hold off.
| When to consider refinancing to a 15-year term | When it might be unwise |
|---|---|
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Tip: If you’re on the fence, consider sticking with your longer repayment term — but make additional principal payments that would end your debt in 15 years. That would let you keep your current mortgage terms and maintain cash flow and budgeting flexibility. An extra payment calculator (like Freddie Mac’s) will show how additional payments can impact your mortgage. Alternatively, making bi-weekly payments would also zero your mortgage balance early. If you go this route, follow your lender’s process to earmark these extra payments toward the principal balance so they’re not applied to your interest.
Related >> When should I refinance my mortgage?
Additional reporting by Deborah Kearns
Frequently asked questions (FAQs)
A 15-year mortgage refinance will pay off your home faster if you move from a longer term. In most cases, your monthly payment will increase because you repay more principal with each payment. However, you’ll pay less interest on your mortgage and have a lower total loan cost.
If you have second thoughts about refinancing, you can back out any time before closing. You can exercise your right of rescission, which gives you three business days after your closing date to cancel the mortgage contract. Though there aren’t financial penalties for exercising this right, you won’t be refunded certain paid-for costs, such as appraisal fees and earnest deposits.
You can qualify for some refinance loans with credit scores as low as 580, but a 670 score is considered good by most lenders, while 740 will get you the best rate offers. Generally, the higher your credit scores, the more likely you’ll get a competitive rate. FICO’s Loan Savings Calculator can help you estimate your mortgage rate based on your credit scores.
Most banks and mortgage companies have a grace period before your payment is considered late. If you fail to make a payment within the time frame, your loan becomes delinquent, and your lender will charge a late fee and report the missed payment to the credit bureaus.
Depending on your lender and state laws, consecutive missed payments could trigger foreclosure. If you’re having trouble paying your mortgage, contact your lender immediately; you may be eligible for a modified repayment plan, forbearance or other mortgage assistance.
Editorial Disclaimer: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airlines, hotel chain, or other commercial entity and have not been reviewed, approved or otherwise endorsed by any of such entities.
This content is for educational purposes only and is not intended and should not be understood to constitute financial, investment, insurance or legal advice. All individuals are encouraged to seek advice from a qualified financial professional before making any financial, insurance or investment decisions.
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