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Published: Oct 11, 2022 5 min read

When it comes to financing your home there are tons of options. But as far as loan duration is concerned, the possibilities mostly come down to two: the 30-year term and the 15-year term.

The overwhelming majority of people who take on a mortgage opt for 30-year loans since longer terms mean lower monthly payments.

What are current 30-year mortgage rates?

What is a 30-year mortgage?

A 30-year mortgage is a home loan that is paid over 30 years. When people talk about 30-year mortgages they are typically talking about fixed-rate loans, though many adjustable-rate loans are also paid over 30 years. A 30-year fixed-rate mortgage is the most popular home financing choice by a fairly wide margin. The reason for this is that it provides predictability and typically lower payments than its shorter-term counterparts. This makes it a better fit for the average person's budget. However, the long payback time means that you will end up paying a lot more interest.

30-year mortgage pros and cons

There will be several points to consider with every mortgage product. There is no “one-size-fits-all” product, and a 30-year loan may or may not be the best option for you. To help you decide, here are some points in favor of, and some against, going with a 30-year loan for your financing needs:

  • The main benefit you enjoy by choosing a 30-year mortgage is a lower monthly payment.
  • Larger purchases can be financed since the comparatively lower payment allows for more DTI wiggle room.
  • The lower monthly payment allows you to better plan your finances around your home payment if you select a fixed-rate home loan.
  • It will take longer before you start building equity in your home since most of your initial payments will go toward interest.
  • Taking on a longer-term loan means that you will inevitably pay more than you would with a 15-year loan.
  • Lenders usually charge higher interest rates for a 30-year term than for a 15-year term.

30-year vs. 15-year loan

The easiest way to understand the difference between a 30-year loan and a 15-year loan is: You pay more now, or you pay more later. So, let’s take a look at how the different loan options would play out.

Here are our assumptions: We are buying a $400,000 property, putting 20% of the purchase price down. This means we won't have to pay private mortgage insurance, which is typically required if you make a smaller down payment. For the sake of simplicity, we will not be including property taxes or mortgage insurance. This is all about the principal payment.

At the time of this writing, the average fixed 15-year loan has an interest rate of 6.58%, and the average 30-year loan has an interest rate of 7.53%. Now that we have all this information in order, let’s run the numbers.

  • The 15-year loan has you paying $2,801.64 per month and $184,294.50 in interest over the life of the loan, assuming that you do not pay it down in advance.
  • The 30-year loan has you pay $2,244.06 per month and $487,862.94 in interest over the life of the loan, assuming once again that you don’t pay down the loan in advance.

The difference between those two amounts of paid interest is $303,568.44—about ¾ of the initial value of the property! When you look at it that way, it might be tempting to want to do everything possible to make the larger payment work within your budget; however, the increased payment may put you above the debt-to-income (DTI) ratio for the product, excluding you from eligibility. This is one of many reasons why, although shorter-term loans might seem like a better option, most folks still have a 30-year fixed product.

30-year mortgage FAQs

When is a 30-year loan worth it?

If you can't afford the increased payment that comes with a 15-year loan, if the increased payment disqualifies you based on DTI ratio requirements or if you want to finance a more expensive home, then a 30-year mortgage might be the best thing for you. You should certainly consider all your options, including other types of mortgages, to determine whether a 30-year loan is the best fit for you. Statistically speaking, it likely will be.

How do I qualify for a 30-year mortgage?

For a 30-year, fixed-rate conventional mortgage, it isn't uncommon to see requirements such as a 620 FICO score, a minimum 3% down payment (though private mortgage insurance will be required if you are putting down less than 20%) and a DTI ratio of 50% or less. However, requirements may vary from lender to lender, so you will need to check with your bank as you shop around for the best deal.

How does a 30-year, fixed-rate mortgage compare to an adjustable-rate mortgage?

With a fixed-rate mortgage, you lock in your rate for the next 30 years, unless you refinance. With an adjustable-rate mortgage, you will likely have an initial fixed period, after which the rate will move with market conditions. This could be to your benefit or your detriment depending on prevailing rates throughout the life of your mortgage.

How can I find the best 30-year rates?

You will have to compare different lenders to get a personalized rate for you, since these may vary by lender. You may want to consider taking a look at a comparison of several different lenders to help you determine which one might be right for you.

What makes our data different?

Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States over the last 7 days. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.

Disclaimer: We try to keep our information current and accurate. However, interest rates are subject to market fluctuations and the rate you are offered will vary based on your qualifications. The above calculations assume a good credit score and factor in regional averages; your actual interest rate may differ. The above calculations are for educational and informational purposes only and are not guaranteed. You should consult a licensed financial professional before making any personal financial decisions.