15-Year Fixed Jumbo Mortgage Rates: Getting Insider Access On The Best Rates
If you can’t afford the house of your dreams, taking out jumbo mortgages may be the right choice. People generally opt for 30-year fixed jumbo mortgages, but depending on your circumstances, a 15-year fixed-rate mortgage may be right for you.
While getting a 15-year fixed-rate jumbo loan to buy an expensive house may come with higher monthly payments, there are benefits to a shorter loan term that make it a great option compared to 30-year fixed-rate mortgages.
In this guide, we’ll explain all you need to know about 15-year fixed-rate jumbo mortgages. We’ll cover the reasons why 15-year fixed-rate mortgages might be right for you, how to qualify for them, and give you insider access to personalized mortgage rates. We also provide tools to help you figure out whether 15-year jumbo mortgages are right for you.
What Constitutes A Fixed Jumbo Mortgage
Fixed jumbo mortgages consist of two mortgage types, both of which we’ll break down in this section.
Fixed-rate mortgages feature an interest rate that remains unchanged throughout the loan’s lifetime. Unlike an adjustable-rate mortgage (ARM), in this type of loan, your interest rates will be locked in once you close on it.
One of the main advantages of a fixed-rate mortgage over an adjustable-rate mortgage is its predictability. Because of the fixed interest rate, borrowers can easily budget their other expenses knowing their monthly payment amount will stay the same until it’s completely paid off. The fixed-rate also protects you from any market fluctuations, futureproofing your mortgage.
Most lenders offer 15, 20, and 30-year fixed-rate mortgages. Longer terms are usually more popular because of the lower monthly payment amount. However, some may prefer the shorter term because they want to pay the loan off as quickly as possible.
The main caveat of a fixed mortgage is that the interest rates are heavily dependent on the market rate at the time. If you’re applying for this loan type when mortgage rates are high, you’ll be stuck with those rates for the rest of your term.
To minimize risk on borrowers defaulting on their loans, the Federal Housing Finance Agency (FHA) sets limits on house loan amounts. Typically, lenders are able to have their mortgages guaranteed by government-sponsored companies Fannie Mae and Freddie Mac. However, in some cases, you may take out a type of mortgage called a jumbo loan that can exceed FHFA limits.
Typically, you’ll need this loan type if the property’s purchase price exceeds local lending limits. While lenders are able to provide larger loan amounts, you won’t be able to have these loans guaranteed by Fannie Mae and Freddie Mac. To balance out the risk lenders take, you’ll typically be subject to stricter qualification requirements if you’re applying for jumbo mortgages.
Why Apply For A 15-Year Home Loan?
A 30-year fixed-rate mortgage is the most popular option because the longer loan term allows you to have lower payments. But there are reasons why a 15-year mortgage could be a good idea, such as:
Enjoy A Lower Interest Rate
Compared to longer loan terms, a lender exposes themselves to less risk with a 15-year fixed-rate mortgage. Because of this reduced risk, they’re more confident about giving you a reduced interest rate and, by extension, a lower annual percentage rate (APR). In addition to that, you’re making half the amount of payments which means you’ll be charged half the interest amount.
Build Home Equity Faster
As you make payments on your loan and your house increases in market value, you’ll build equity on your home. This equity represents the parts of your home that you truly own and can be part of your long-term wealth-building strategy. If you have a 15-year mortgage, you’ll build home equity faster compared to a 30-year fixed-rate mortgage.
Once you’ve built up enough home equity, you can borrow against it in the form of a home equity loan or line of credit. You can also use it to buy a new home or leverage it for your retirement funds.
Save Money In The Long Run
While the higher monthly payments may seem daunting to budget for, having a 15-year mortgage can help you save money in the long term. This saving comes from the lower annual percentage rate as well as the fact that you’ll be paying for much less interest in the short-term loan.
Assume that you plan to apply for an $800,000 mortgage with a 20% down payment. A 30-year loan with a 2.9% interest rate requires you to pay $318,993 in total interest, while a 15-year loan with a 2.38% interest rate will require you to pay $121,650 in total interest. Even with the same principle, you’ll have accumulated much more in interest on a long-term loan.
Caveats Of 15-Year Fixed Jumbo Mortgages
While a 15-year loan may offer many advantages, there are also things that you need to keep in mind before you apply for one.
More Expensive Monthly Payments
Because you’re paying the same amount of money in a shorter period, you can expect to have larger monthly payments. Depending on your loan size, you may be charged 50% higher per monthly payment on a 15-year fixed-rate mortgage compared to a 30-year one.
Always keep in mind that you have to pay for other needs and save for emergencies on top of this monthly payment. If you can’t reliably pay the monthly installments without stretching your finances thin, we advise against getting a 15-year fixed-rate loan.
As an additional caveat, you may also be charged higher closing costs and other lender fees on a jumbo because of the higher loan amount. While you can fold them into the loan itself, it’s better to pay them out-of-pocket so you can avoid extra interest on your home loan.
Having a shorter timeframe to pay for your 15-year fixed-rate mortgage means that you may have to settle for a cheaper house. Taking out a large loan without a long payment period may saddle you with a prohibitively expensive monthly payment.
By applying for a 30-year fixed-rate loan, you may have a better chance to qualify for larger amounts and afford the house of your dreams.
Potentially Lose Out On Other Investments
In addition to money, a shorter-term mortgage may incur an opportunity cost. Because more of your money is tied up with mortgage payments, you may miss out on investing in other things such as a retirement account or the stock market.
Qualifying For Fixed Jumbo Mortgages
Because lenders can’t have jumbo mortgages guaranteed, they typically require you to be much more financially stable compared to other mortgage applicants. In this section, we’ll break down the four essential qualification requirements.
Excellent Credit Score
Your credit score is a reflection of your reliability as a borrower. This score ranges from 300 to 850 and it’s determined by several factors surrounding your debt situation, such as your credit card bills and student loans. For jumbo loans worth up to one million dollars, most lenders will require a minimum credit score of 700. If you’re planning to take out a larger loan, lenders will require a larger credit score to match.
History Of Consistent Income
To qualify for jumbo mortgages, lenders need to see proof that you have consistent income. This means you need to provide up to two years of payment information to ensure that you’re able to pay the loan and your income is unlikely to change.
Healthy Debt-To-Income Ratio
A debt-to-income ratio calculates your earnings versus your debts. To find your DTI, you have to divide your minimum monthly debt payments by the gross amount of monthly earnings.
For instance, if your minimum monthly bills are $1,500 and your gross income is $3,000, your DTi ratio is 50%. If you have a good DTI ratio, it informs lenders that your cash flow is enough to cover your monthly payments.
15-Year vs 30-Year Mortgage: Which One Is Better For You?
Both 15-year and 30-year loans have their own advantages and disadvantages. Generally, you’ll benefit much more from a 15-year loan if you plan to pay your mortgage off as quickly as possible. Taking on a shorter loan term also benefits you if you don’t see yourself staying in that house for the long run. Because your equity builds faster, you can profit more from selling the house.
However, remember that mortgages are a commitment, regardless of term. If you take on a 15-year loan with an uncertain income, you may stretch your finances too thin and not have enough money to pay for other needs on top of your monthly payments.
If you plan on staying in your new home for a long time, we recommend that you take a 30-year loan. A longer loan term also requires lower monthly payments, allowing you to save for other needs without stretching your budget.
However, this safer option does come with the caveat of a higher interest rate and annual percentage rate. Most lenders impose a higher interest rate on a 30-year mortgage, and you’ll be making twice the amount of payments compared to a 15-year loan, all of which will have interest charged on top of it. Therefore, a 30-year loan will not be right if you’re looking for long-term savings.
Refinancing Jumbo Mortgages
Refinancing is a popular method to reduce your mortgage interest rates. However, getting a mortgage refinance on a jumbo can be tougher compared to a conforming loan. Because jumbo refinances aren’t guaranteed by Fannie Mae and Freddie Mac, lenders enact stricter qualification guidelines for borrowers.
In addition to the high credit score, DTI ratio, and consistent income requirement they require to qualify for jumbo mortgages, lenders also have additional requirements for refinancing. Lenders do not accept refinance applications from someone with more than four mortgaged properties, and they’ll require the borrower to have no record of bankruptcy in the last seven years.
Despite the strict requirements, there are benefits to refinancing. Because jumbo refinance rates are generally similar to their conforming counterparts, you stand a chance of saving lots of money if you can lock in lower rates. If you’re considering refinancing, you should research the current refinance rates and see whether the added effort is worth it.
Getting The Best Mortgage Rates
Getting the best mortgage rate, especially on a 15-year mortgage, can save you a lot of money. In this section, we’ll share top tips on how to find the best rates on your mortgage loans.
Pay More Than 20% Down Payment
The more money a lender loans, the more risk they take on. With jumbo mortgages, they don’t only put a lot more money at risk, they also have no backup option because these loans cannot be guaranteed. However, you can convince them that you’re less of a risk by putting more money down.
By paying more than the typically required 20% down payment, the lender may give you more favorable mortgage rates. In addition to that, putting more money down means that you’ll be reducing your loan principal, which equates to lower payments.
Shop Around For Loan Offers
As a borrower, you have many options for mortgage lenders. While your current bank is a good place to start, you should shop for better rates from other lenders.
Try applying for credit from all kinds of lenders – online lenders, credit unions, and banks. These lenders are required to give you standardized documents containing their offered interest rate as well as the annual percentage rate, so you can compare them more comprehensively.
However, you should keep in mind that the market for jumbo mortgages is smaller compared to conforming loans, so you may need to do more legwork to find the loan that fits your needs.
Seek Advice From Mortgage Brokers
To simplify the entire home buying process, you can enlist the services of a mortgage broker. These financial professionals can connect you with the right lenders and help you through the mortgage application process. They can also help you estimate the mortgage amount you’ll need to buy the house of your dreams.
Working with mortgage brokers can be helpful for mortgage borrowers with less experience. In addition to handling your application and answering your questions, brokers can also assist you in finding the best refinance rates on your home loan.
If you can afford the higher monthly payment, 15-year fixed jumbo mortgages can be the perfect option to buy your dream home. Taking on a shorter loan term helps you pay the loan off faster and allows you to build equity on your home in a shorter period. However, you should keep in mind that there are opportunity costs associated with taking on a shorter mortgage, and your monthly payments will be larger.
If you’re looking for 15-year fixed jumbo mortgages to buy your home, Wesley Mortgage, LLC is here to help! Our team of financial professionals will help you find short-term jumbo mortgages with the best interest rates. Contact us today for more information!