What Is Loan Term?
Loan Term: The length of time you have to repay a mortgage, most often 30 or 15 years.
The loan term is how long you have to pay off the mortgage. The most common terms are 30 years and 15 years, with 10-, 20- and 25-year terms also available.
Trade-offs
| 30-year | 15-year | |
|---|---|---|
| Monthly payment | Lower | Higher |
| Interest rate | Higher | Lower |
| Total interest | Much more | Much less |
| Equity growth | Slower | Faster |
Middle ground
You can take a 30-year loan for the lower required payment and make extra principal payments when you can. Most mortgages today don't have prepayment penalties for primary homes, but check your loan documents.
Good to know
Lenders qualify you on the required payment, so a 30-year term gives more buying power than a 15-year term.