February 5, 2024
There are important differences between FHA loans with 15-year mortgages and 30-year loan terms. Those differences include the number of years you’ll pay but also how much interest you may owe.
What do you need to know about the fine points of selecting a loan term for your mortgage?
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 in writing. Usually, this occurs sometime after closing day.
Will the actual time you pay on the loan be affected by your move-in date? In some cases, yes.
If you have a construction loan, you might have to wait up to 12 months while the construction is happening.
Once it’s completed and all inspections and other required processes are complete, you can move in and start making payments.
Will the construction project delay the start of your monthly payments? Unless you and the lender have agreed otherwise in writing, your loan is still due on the original final payment date, and a balloon payment could apply depending on circumstances.
That deadline is applicable whether or not your FHA One-Time Close construction loan payments began on time or if you had to wait.
How 15 and 30-Year Loans Differ
Shorter loan terms are appealing to the lender. They have a reduced risk for a shorter loan term and may offer you a lower interest rate as a result.
NJ.com reported on early February 2024 interest rates, noting the following differences between 15 and 30-year mortgage interest rates:
NJ.com reports typical mortgage interest rates at press time for a standard 30-year fixed mortgage were at or near 7.06%.”
NJ.com also reported the average mortgage rate for a standard 15-year loan (numbers valid at press time, your experience will vary) at 6.49%.
15-year loans feature a larger monthly mortgage payment. A 30-year fixed-rate mortgage hypothetically costs less each month, but the benefit of paying off the shorter loan with the lower interest rate means paying less over time. It’s a trade-off.
Down Payment Questions
It’s easy to assume there might be differences in the down payment requirement based on the loan term you seek, but there is no different down payment structure applicable to a specific duration of the mortgage.
That means no higher down payment is based on whether you choose the longer or shorter mortgage term. Typically, borrowers can expect a mortgage loan to cost more over time if it is a longer term because of interest charges.
Ask a participating FHA lender to explain how 15 and 30-year mortgage terms look side-by-side when comparing the costs of both.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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