Understanding Conventional Mortgage Loan Terms
The loan term — the length of time scheduled for repayment — is one of the key decisions in a mortgage. Understanding how different terms can affect your monthly payment and total borrowing costs can help you have a more informed conversation with your mortgage professional.
Loan Term Basics
What Is a Mortgage Loan Term?
The loan term is the length of time scheduled for repayment of the mortgage. It represents the number of years over which the borrower is expected to make regular payments until the loan balance is paid in full.
Different loan terms can affect the monthly principal-and-interest payment, the total amount of interest paid over the life of the loan, and the overall cost of borrowing. Available terms depend on the lender, loan program, borrower qualifications, and property.
Key Considerations
How Loan Terms Affect Your Mortgage
- The loan term directly influences the size of the monthly principal-and-interest payment.
- Longer terms generally spread repayment over more time, which may lower the required monthly payment.
- Shorter terms generally require higher monthly payments but may reduce the total interest paid.
- The interest rate offered may also differ depending on the loan term selected.
- Total borrowing costs — including interest paid over the life of the loan — can vary significantly between terms.
Program Overview
Common Mortgage Loan Terms
Conventional mortgage programs may offer a variety of loan terms. The terms available to any individual borrower depend on the lender, loan program, and borrower qualifications.
30-Year Fixed-Rate
One of the most commonly discussed conventional mortgage terms. Repayment is spread over 30 years, which generally results in a lower required monthly payment compared to shorter terms.
20-Year Fixed-Rate
A mid-range term that may offer a balance between monthly payment size and total interest paid compared to 30-year and 15-year options.
15-Year Fixed-Rate
A shorter term that generally requires a higher monthly payment but may result in less total interest paid over the life of the loan compared to longer terms.
10-Year Fixed-Rate
A shorter-term option that typically carries a higher monthly payment. May be discussed by borrowers seeking to pay off a mortgage more quickly.
Other Available Terms
Depending on the lender and loan program, other term options may be available. Not all terms are offered by every lender or available in every situation.
Side-by-Side Comparison
Shorter vs. Longer Loan Terms
Actual rates, payments, and costs depend on the specific loan, lender, and borrower qualifications. The information below is general and educational in nature.
Monthly Payment
Longer Term
Generally lower principal-and-interest payment
Shorter Term
Generally higher principal-and-interest payment
Repayment Period
Longer Term
Repayment is spread over a longer period of time
Shorter Term
Mortgage may be paid off in a shorter period of time
Total Interest Paid
Longer Term
May result in more total interest paid over the life of the loan
Shorter Term
May result in less total interest paid over the life of the loan
Budget Flexibility
Longer Term
Lower required payment may allow more monthly cash flow flexibility
Shorter Term
Higher required payment may reduce monthly cash flow flexibility
Equity Building
Longer Term
Equity may build more slowly in the early years of the loan
Shorter Term
Equity may build more quickly due to faster principal reduction
Working With a Professional
Choosing a Loan Term
There is no single loan term that is right for every borrower or every situation. The appropriate term depends on a number of individual factors that are best discussed with a licensed mortgage professional.
A mortgage professional can help you evaluate the programs available to you and understand how different term options may affect your overall financing.
Ready to Begin?
Explore Your Mortgage Options
Connect with the Prosper Path Group team to discuss your mortgage options and explore the loan terms and programs that may be right for your situation.
Loan programs, rates, terms, eligibility, and availability are subject to lender guidelines and may change without notice. Not all programs are available in all circumstances. This information is for general educational purposes only and is not a commitment to lend.
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