What Is a 15-Year Fixed Mortgage and How Does It Work?

Find out what it is and if it is right for you.

A 15-year fixed mortgage is a home loan with an interest rate that doesn't change, one that you repay over 15 years. Since your rate doesn't change, your monthly principal and interest payments don't change.

If you are ready to buy a home, you should consider all mortgage loan options to find the right loan for you. This guide will explain what a 15-year mortgage loan is, how it works, what its key features are, and how to decide if it’s the right choice for you.

What Is a 15-Year Fixed-Rate Mortgage?

A 15-year fixed-rate mortgage is a home loan that keeps the same interest rate for the entire 15-year repayment period. Since the principal balance, interest rate, monthly payments, and payoff time don't change, you'll know total borrowing costs and repayment timeline up front and have predictable payments.

While the interest rate and total costs are typically lower than those of a 30-year loan, a 15-year mortgage has higher monthly payments to allow you to pay off the loan in half the time.

How Does a 15-Year Fixed Mortgage Work?

When you apply for a 15-year fixed-rate mortgage, your lender offers you the chance to borrow money at a specific interest rate. That rate depends on your financial credentials, such as your credit score, down payment, and how much you're borrowing relative to your earnings.

The 15-year mortgage loan rate is usually lower than the rate on a 30-year mortgage, because the lender takes on less risk if you pay the loan in half the time.

When you choose a 15-year mortgage loan to buy your home, your loan will be structured so you repay the full amount due in 15 years. Your principal and interest payment won't change. This is a key difference between an adjustable-rate mortgage vs. a fixed-rate mortgage. With an ARM, your rate is tied to a financial index and can fluctuate, potentially causing your payments to rise.

Key Features of a 15-Year Fixed Mortgage

Here are the key features of a 15-year fixed-rate mortgage that you need to know about:

• Fixed interest rate: Interest is the cost of borrowing. Since the rate does not change, you'll know the cost up front. Each month, your payment will cover the principal and interest due.
• Lower interest paid over time: A 15-year mortgage usually has a lower rate than a 30-year fixed-rate mortgage. The costs of borrowing will be lower both because of the lower rate and because you only pay interest for 15 years instead of 30 years.
• Shorter repayment period and higher monthly payments: Since you're paying off your loan more quickly, each monthly payment must be much higher to bring the balance to $0 in half the time it takes for a 30-year loan to be repaid.

Understanding your interest rate and repayment timeline can help you better understand how much your loan will cost you each month and over the life of the loan.

Example of a 15-Year Fixed-Rate Mortgage

Here is an example of how a 15-year fixed-rate mortgage might work compared with a 30-year fixed-rate loan. Let's assume it is for a $400,000 loan obtained in August 2025.

The 15-year mortgage has much higher monthly payments. You'll pay $784 more per month, but, you'll save $322,434 in interest and have your house paid off 15 years earlier.

Pros and Cons of a 15-Year Fixed Mortgage

Here are some of the biggest benefits of a 15-year fixed-rate mortgage.

• Less interest paid: The shorter the period of time you borrow, the less interest you must pay.
• Faster equity growth: Home equity is the value of your home minus the amount you owe the bank. If you owe the bank $250,000 and your home is worth $300,000, you have $50,000 in equity. Since a 15-year loan allows you to pay off your mortgage faster, you build equity faster.
• Lower interest rate: Both your mortgage interest rate and your annual percentage rate (APR) are typically lower with a 15-year loan. APR is different from interest rates because it takes interest and fees into account. Since lenders take on less risk with a shorter loan, both your APR and mortgage rates are typically lower with a 15-year mortgage compared to a 30-year loan.

Disadvantages of 15-Year Fixed Mortgages

There are also some downsides to 15-year mortgages, including the following.

• Higher monthly mortgage payment: Since you have only 15 years to repay your loan, each monthly payment must be higher to pay off your principal balance on time.
• Less budget flexibility: You are committing to the larger payments when you take a 15-year loan, which means you'll have less money to work with after monthly bills.
• Limited home affordability: You can only borrow to buy a home if the lender believes your monthly payments will be affordable based on your debt relative to your income. Since a 15-year mortgage makes your payments higher, you may qualify only for a smaller home loan to stay within your lender's debt-to-income ratio guides.

5 Types of 15-Year Fixed Mortgages

There are different kinds of 15-year mortgages that could be available to you. You should research all of the different types of mortgages to find the right one for you. Here are some of the most common options.

1. FHA Loan

FHA Loans are guaranteed by the Federal Housing Administration (FHA), although the loans are made by private lenders.

Because of the government guarantee, FHA loan requirements are more relaxed than the loan requirements for a conventional loan without government backing. You can also make a down payment as low as 3.5%. However, you must pay for mortgage insurance with all FHA loans.

2. VA Loan

VA loans are guaranteed by the Department of Veterans Affairs and are for eligible active-duty servicemembers or veterans. These loans are backed by the VA but offered by private lenders, so the qualifying requirements are very relaxed.

The VA itself does not require any down payment for VA loans, although some lenders might. The interest rates are typically competitive, and there is no mortgage insurance required, although VA loans do have a one-time funding fee.

3. USDA Loan

USDA Loans are made by private lenders and guaranteed by the US Department of Agriculture, although very low-income individuals and households may be able to qualify for a Direct USDA Loan.

USDA loans are intended to help people buy rural homes, so the properties must be located in eligible areas. There is no specific minimum credit score required by the USDA although most lenders set a minimum score. There is also no down payment requirement in place.

4. Conventional Loans

Conventional loans are not guaranteed or insured by the government. Private lenders make the loans. As a result, they can be harder to qualify for but may have lower interest rates and fees for homebuyers with solid financial qualifications.

Conventional loans can be conforming, which means they meet specific guidelines set by Fannie Mae and Freddie Mac. These guidelines include conventional loan limits, which change on an annual basis. Conforming conventional loans can be sold to Fannie Mae and Freddie Mac, both of which are government-sponsored entities. Lenders may offer better rates on these loans because they can be easily resold.

Non-conforming loans don't meet these guidelines and can't be purchased by Fannie Mae or Freddie Mac. They may have higher monthly payments or higher down payment requirements because it's riskier for lenders to make loans they don't' know they can resell.

5. Jumbo Loan

Jumbo loans are conventional loans that are non-conforming because they are for a larger amount.

The threshold at which a conventional loan becomes a jumbo loan can vary over time. In 2025, it is $806,500 in most parts of the country but is higher in certain expensive areas, such as in many California communities, where the loan limit is $1,209,750.

Refinancing from a 30-Year Loan into a 15-Year Loan

In some cases, it may make sense to refinance a mortgage with a 30-year term into a 15-year loan.

You may want to do this if you hope to pay off your mortgage early.

Of course, you can pay your mortgage off early even if you have a 30-year loan simply by making extra payments. But if you want to take a more disciplined approach and force yourself to get ahead, refinancing to a 15-year loan could be a solution. Just be sure you can comfortably afford the payments.

You may also decide to refinance from a 30-year loan to a 15-year loan if you have been paying on your 30-year loan for a while and want to refinance for any reason (such as taking cash out to improve your home or consolidate high-interest debt).

Say, for example, that you have 18 years left to pay off your 30-year loan balance, but you want to refinance. If you opted to refinance into a new 30-year loan, you'd significantly extend your repayment time and might end up owing more interest in the end due to paying it longer, even if your new loan has a better rate. If you opted for the 15-year term, though, you'd actually pay off your home a little sooner than expected.

Final Thoughts on 15-Year Fixed Mortgages

A 15-year fixed-rate mortgage provides predictability and a speedy path to paying off your home loan. There are a number of benefits and drawbacks to these loans, so it's important to research all options to make sure you're getting a loan that best aligns with your financial goals.

Freedom Mortgage can help you find the right refinance loan. Give us a call to connect with a home loan professional and start the loan process today.