The average length of a mortgage in the US is a 30-year term. But there's a twist. Most people don't keep their mortgage for that long. Refinancing, selling, and unexpected life changes often shorten the actual time a homeowner pays off their loan.
Affordability: Most people cannot afford to pay the full price of a home upfront. Spreading payments over 30 years makes homeownership more accessible, allowing more individuals to buy homes.
The 1003 mortgage application is one of the most common forms, also known as the Uniform Residential Loan Application.
The average mortgage payment is $2,715 on a 30-year fixed mortgage and $3,552 on a 15-year fixed mortgage. The median payment, a more accurate measure, is $2,617, according to the Mortgage Bankers Association.
Repayment Mortgage
The most common mortgage type, repayment mortgages are the base for the vast majority of other mortgages on the market, regardless of their fancy marketing names and terms.
Your monthly payment for a $300,000 mortgage and a 30-year loan term could range from $1,798 to $2,201, depending on your interest rate and other factors. Learn more about the upfront and long-term costs of a home loan.
A conventional fixed-rate mortgage is one of the most popular mortgage types. With this loan, the interest rate remains the same throughout the life of the loan, which can be 15, 20, or 30 years. Because the rate doesn't change, your monthly principal and interest payments will remain consistent.
1. Conventional Loan. A conventional loan is a type of mortgage that isn't insured by the federal government. It's also the most popular kind of home loan.
United Wholesale Mortgage is the largest mortgage lender in the United States, originating 294,387 mortgages worth $108 billion in 2023.
With a longer mortgage term, not only will you pay more in interest, but you'll also probably pay more in mortgage fees too, as it's likely you'll switch deal more times over the course of 35-year term than a 25-year term.
The current Bank of America, N.A. prime rate is 7.50% (rate effective as of December 19, 2024).
Since you're making bigger monthly payments on a 15-year mortgage, you'll pay down the interest a lot faster, which means more of your payment will go to the principal every month. On the flip side, the smaller monthly payments of a 30-year mortgage will have you paying down the interest a lot slower.
Conventional Mortgages
Conventional mortgages are the most common type of mortgage. That said, conventional loans may have different requirements for a borrower's minimum credit score and debt-to-income (DTI) ratio than other loan options.
"It's definitely not required." Nationally, the average down payment on a house is closer to 10% or 15%, Hale said. In some states, the average is well below 20% while some are even below 10%, she added. Some loans and programs are available to help interest buyers purchase homes through lower down payments.
The average mortgage term in the U.S. is 30 years, though many homeowners refinance or move before completing this term. Homeowners typically stay in their homes for about eight years on average. A 30-year mortgage helps keep monthly payments more affordable for borrowers.
Fixed-rate mortgages
Your monthly payments are more likely to be stable with a fixed-rate loan, so you might prefer this option if you value certainty about your loan costs over the long term. With a fixed-rate loan, your interest rate and monthly principal and interest payment stay the same.
An FHA loan will typically be the easiest mortgage to qualify for because it offers the lowest credit score requirement — far lower than for a conventional loan — and requires only a 3.5% down payment.
Today's mortgage rates
Average 15-year mortgage rates were 5.82%. Both of these rates decreased slightly compared to the month before, but they've been trending higher in recent weeks.
Fee simple absolute is the most common form of homeownership. This type of ownership has the following features: The holder of a title in fee simple has full possessory rights now and in the future for an infinite duration. There are no limitations on its inheritability.
To afford an $800,000 house, you typically need an annual income between $200,000 to $260,000, depending on your financial situation, down payment, credit score, and current market conditions. However, this is a general range, and your specific circumstances will determine the exact income required.
Making an additional payment each quarter results in four extra payments per year. On a $220,000, 30-year mortgage with a 4% interest rate, you would cut 11 years off your mortgage and save $65,000 in interest.
If your lender offered you a $300,000 loan with a 15-year fixed-rate term at a 7% annual percentage rate (APR), you could expect your monthly payment — principal and interest — to be about $2,696. If you took out a 30-year fixed-rate mortgage with a 7% APR, your payment could be about $1,995.