What is the Average Mortgage Length? What Mortgage Length Is Best?

Usually in the USA, 30 years is the most common mortgage term. A 30-year mortgage means the borrower has 30 years to pay back their loan. However, in most cases, people don’t keep this type of mortgage for 30 years. Therefore, the average mortgage length in the USA is under 10 years.

Key Takeaways

• Mortgage length is mostly known as mortgage term and it is a very important factor that you should pay attention to while you are closing a mortgage deal
• Mortgage length plays a very significant role in the interest rate
• In the USA, more than 88% of home buyers/owners finance their houses through a home loan
• 30 – year fixed rate mortgage is the most common type of mortgage term in the USA
• You should keep in mind that the shorter the mortgage length the higher the monthly payments will be

What is the Mortgage Length?

A mortgage length refers to the total lifespan of the mortgage. It indicates how many years and months you have to make monthly mortgage payments to the lender until the borrowed amount is paid. For example, if your mortgage term is 30 years then it means you have at least 30 years to pay the debt. In this time period, you will have a payment due each month.

Mortgage length plays a very significant role in the monthly mortgage amount as well as the interest rate. If you have a 30-year mortgage then your monthly payment will be less but you have to pay a higher interest rate. On the other hand, if you have a 15-year mortgage then your monthly mortgage payment will be big but your interest rate will be lower. So, some advantages of short-term mortgages are –

• Fewer total payments
• Paying off your mortgage faster
• Lower total cost

Some advantages of long-term mortgages are –

• Lower monthly payments
• More time to pay off your mortgage
• Opportunity to benefit from lower rates in the future

What Is The Average Mortgage Length?

In the USA, more than 88% of home buyers/owners finance their houses through a home loan. And among these people, more than 90% of people choose a 30-year fixed-rate loan. The below table will give you a clear idea –

Loan Type	Percent of Borrowers Buying a Home	Percent of All Home Buyers
Use Any Type of Financing	100%	88%
30-year Fixed	90%	79.2%
Paid Cash in Full	N/A	12%
15-year Fixed	6%	5.28%
Other Loan Terms	2%	1.76%
Adjustable-rate	2%	1.76%

Types of Mortgage Term

30 – Year Fixed Rate Mortgage

This is the most common type of mortgage term in the USA. In fact, this type of loan term is popular among the new homeowners as well as people who already have at least one or more homes. This is because this type of loan term fits more financial situations than any other home loan. One key advantage of this type of mortgage term is low monthly payments. Other key points of a 30 year fixed rate mortgage are –

• If you can increase the monthly mortgage payments then you will be able to build equity for your home faster
• Usually, no prepayment penalty for this type of mortgage
• Thanks to the low monthly mortgage payments you will be able to use your funds for investing and on other expenses
• If the interest rate increase then the homeowner is protected but if the interest rate falls then the homeowner can refinance into a lower rate loan which is very convenient

15 – Year Fixed Rate Mortgage

If you choose this type of mortgage length then you will own your home free and clean in 15 years. Though the monthly payment for this type of mortgage will be higher than a 30-year mortgage but the interest rate will be lower. It means you will be able to save money on interest charges. If you have a decent monthly income then you can easily afford the monthly payments of this type of mortgage. Some key advantages of this type of mortgage are –

• Because of the lower loan term, homeowners will be able to own their home within half the time they would need for a 30-year mortgage
• The homeowners will be able to save lots of money from the interest charge
• The interest rate of this type of loan is lower than long term mortgages

10 – Year Fixed Rate Mortgage

The best part of this type of mortgage is, that the interest rate won’t change throughout the loan term. So, if the interest rate increase, you don’t have to worry about it. If you have a high monthly income and if you want to completely own your house within a short time then this type of mortgage will be the right option. This type of mortgage will have higher monthly payments but the interest rate will be lower.

So, you will also be able to save money on interest charges. According to many financial experts, a 10-year mortgage will be a smart decision because the borrower will be able to save hundreds of thousands of dollars in interest. Some advantages of a 10-year fixed-rate mortgage are –

• The monthly payments will be higher but you will save money in the long run
• The interest rate remains fixed for 10 years regardless of the current interest rate
• You will become the owner of the home within 10 years or less

40 – Year Fixed Rate Mortgage

In this type of mortgage, the interest rate is a bit higher than a 30-year mortgage but the monthly payment will be lower. If you are looking for a long-term mortgage with a lower mortgage payment then you can choose this type of mortgage length. This type of mortgage is suitable for people who have limited monthly income. The downside of this type of mortgage length is, that your total mortgage cost will increase due to a higher interest rate. Some key points of this type of mortgage are –

• The interest rate is fixed for the whole loan term and it won’t change regardless of the cur5rent interest rate
• The monthly mortgage payment will be lower and more affordable
• You will be able to buy a more costly or large house

50 – Year Fixed Rate Mortgage     

This type of home loan is quite different compared to a 30 – year mortgage. This type of mortgage will allow you to pay a small amount toward the principal in the beginning. It means you will be able to invest your money in other sectors. The monthly mortgage payment of a 50-year mortgage is very low and you can get approved for a large mortgage and buy a big house. But the interest rate will be very high so, your overall mortgage cost will increase compared to a 30-year or a 40-year mortgage. Some advantages of a 50-year fixed-rate mortgage are –

• Payments of this type of mortgage are based on a 50-year amortization schedule
• This type of loan is a good option for people who have an excellent credit score
• The low monthly payments will allow the borrower to invest the extra funds or use the funds for other expenses

FAQs about What is the Average Mortgage Length

Can you extend or reduce your mortgage term?

The answer to this question depends on quite a few things but mostly on the lender. You have to go through affordability checks and might need to pay additional fees to extend or reduce the mortgage term. If the lender allows you then extending the mortgage term will reduce your monthly payments. On the other hand, if you want to reduce the loan term then it will increase the monthly mortgage payments.

How long should your mortgage term be?

The answer to this question totally depends on your financial condition and monthly income. If you can bear a large monthly mortgage payment then you can opt for a short-term mortgage. This type of mortgage will save you lots of money on interest charges. On the other hand, if you want affordable monthly mortgage payments then you should choose a long-term home loan. A long-term home loan will cost you more money on interest rate because this type of home loan tends to have a higher interest rate.

Is 30 years mortgage the longest in the USA?

No, 30 years mortgage isn’t the longest in the USA. The longest mortgage in the USA is 50 years. Like any other mortgage terms, a 50-year mortgage is available as both fixed and adjustable-rate loans.

What percentage of Americans are debt-free?

According to a recent survey, about 23% of Americans are debt-free.

What is the average debt of a US citizen?

The average debt of a US citizen is $90,460 and it includes credit card debts, personal loans, mortgage, student debt, etc.

References:

https://www.nerdwallet.com/uk/mortgages/what-is-a-mortgage-term/
https://www.chase.com/personal/mortgage/education/financing-a-home/choosing-mortgage-term

Last Updated on November 2, 2022 by Magalie D.