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15-Year Fixed Rate Mortgages Look Cheap Compared To Comparable 30-Year Fixeds
 

It's a great time for Minneapolis buyers and homeowners to look at the 15-year fixed rate mortgage.
According to Freddie Mac's weekly Primary Mortgage Market Survey, the relative "discount" of a 15-year fixed rate loan as compared to a comparable 30-year product is the largest in recorded history. The interest rate spread between the two benchmark products is now 0.77%, nearly double the recent, 5-year average of 0.44%.
Despite its lower rates, however, homeowners that opt for a 15-year fixed mortgage should be prepared for higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half as many years as with a 30-year amortizing product.
The payment increase is 41% higher at today's rates. If you can manage that, though, you'll reap dramatic interest payments savings over time. For each $100,000 borrowed at today's market interest rates, your mortgage interest costs on a conforming 15-year term mortgage will be lower by $56,000 versus an identically-structured 30-year term. The more you borrow, the more you save.
That said, not everyone should use the 15-year product.
One reason you may want to avoid 15-year products is because the higher payments may lead to financial stress. Unless ... more

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