15 Year vs. 30 Year FHA Mortgages
February 10, 2024
What’s the difference between a 15-year mortgage and a 30-year home loan? Aside from the obvious (the number of years you’ll pay on the mortgage), there are some important things to know about your loan term.
The Start of Your 15 or 30-Year Loan Term
15-year and 30-year mortgages typically start their loan terms the month you and the lender agree upon, sometime after closing day.
In some cases, that loan term is affected by your move-in date. If you have a construction loan, you might have to wait 7 to 12 months while the construction is happening.
And that may delay the start of your payments. What is important to know is that unless you and the lender have agreed otherwise in writing, your loan will still come due on the original final payment date.
That’s regardless of whether or not your FHA One-Time Close construction loan payments started “on time” or not.
The Main Difference Between 15 and 30-Year FHA Mortgages
Interest rates are typically lower for shorter loan terms. The lender has a smaller degree of risk, hence the lower rate. NJ.com reported on early February 2024 interest rates, noting the following differences between 15 and 30 year mortgage interest rates:
“The average mortgage interest rate for a standard 30-year fixed mortgage is 7.06%,” while NJ.com also reported the average mortgage rate for a standard 15-year loan at press time at 6.49%.
15-year loans have higher monthly mortgage payments than fixed-rate mortgages, but the benefit of paying off the shorter loan (combined with the lower rate) is obvious. You’re out of the loan in a comparatively short amount of time.
Down Payment Issues?
It’s easy to understand why someone might assume that there is a difference in the down payment requirement for a shorter loan term than for a longer one, but according to FHA loan rules, the down payment requirement applies regardless of the duration of the mortgage.
That means you aren’t penalized for choosing one loan term over the other, at least not regarding the down payment. You should expect your loan to cost more if it is longer due to interest.
Ask a participating lender to show you how the two loan terms compare side-by-side when it comes to the costs of each.
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RELATED VIDEOS:
Home Equity Can Secure Your Second Mortgage
Consider the Advantages of Discount Points
FHA Limits are Calculated and Updated Annually
The Start of Your 15 or 30-Year Loan Term
15-year and 30-year mortgages typically start their loan terms the month you and the lender agree upon, sometime after closing day.
In some cases, that loan term is affected by your move-in date. If you have a construction loan, you might have to wait 7 to 12 months while the construction is happening.
And that may delay the start of your payments. What is important to know is that unless you and the lender have agreed otherwise in writing, your loan will still come due on the original final payment date.
That’s regardless of whether or not your FHA One-Time Close construction loan payments started “on time” or not.
The Main Difference Between 15 and 30-Year FHA Mortgages
Interest rates are typically lower for shorter loan terms. The lender has a smaller degree of risk, hence the lower rate. NJ.com reported on early February 2024 interest rates, noting the following differences between 15 and 30 year mortgage interest rates:
“The average mortgage interest rate for a standard 30-year fixed mortgage is 7.06%,” while NJ.com also reported the average mortgage rate for a standard 15-year loan at press time at 6.49%.
15-year loans have higher monthly mortgage payments than fixed-rate mortgages, but the benefit of paying off the shorter loan (combined with the lower rate) is obvious. You’re out of the loan in a comparatively short amount of time.
Down Payment Issues?
It’s easy to understand why someone might assume that there is a difference in the down payment requirement for a shorter loan term than for a longer one, but according to FHA loan rules, the down payment requirement applies regardless of the duration of the mortgage.
That means you aren’t penalized for choosing one loan term over the other, at least not regarding the down payment. You should expect your loan to cost more if it is longer due to interest.
Ask a participating lender to show you how the two loan terms compare side-by-side when it comes to the costs of each.
------------------------------
RELATED VIDEOS:
Home Equity Can Secure Your Second Mortgage
Consider the Advantages of Discount Points
FHA Limits are Calculated and Updated Annually
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