As mortgage rates continue to hover at 30 year lows, many people are wondering whether a 15-year or a 30-year mortgage term is a better option. After all, even though payments on the 15-year option would be higher, the lower interest rates on the shorter term loan are keeping payments, in many cases, at very manageable levels.
With the average 15-year interest rate near 3.5 percent for those with good credit, versus around 4.5 percent for a 30-year mortgage, it’s hard not to at least consider the shorter term mortgage option. Further the higher payments, lower interest rate, and shorter repayment term of the 15-year mortgage option allows people to pay down their principal much faster, too.
Apparently quite a number of homeowners have jumped to 15-year mortgages lately. In fact, according to data from CoreLogic, for the first half of this year, over 25 percent of homeowners who refinanced went with a 15-year option. This is a drastic increase over past years, when only about 9.4 percent of home owners went that route.