30-year mortgage

A home loan repaid over 30 years, the most common U.S. term, offering the lowest required payment at the cost of more total interest.

What it means

A 30-year mortgage is repaid over 360 monthly payments, usually at a fixed rate. Spreading the balance over three decades keeps the required payment low, which helps buyers qualify and leaves room in the monthly budget.

Because the balance falls slowly, especially in early years, much more interest accrues than on a shorter loan, and rates are typically a bit higher too. It tends to suit first-time buyers, households that value monthly flexibility and those who would rather put extra cash toward savings or other goals.

Formula

M = P × r(1 + r)^n / ((1 + r)^n − 1)

M = monthly payment (principal and interest)
P = amount borrowed
r = annual interest rate ÷ 12
n = total number of monthly payments

Example

For illustration, $300,000 at 6% over 30 years costs about $1,798.65 a month and about $347,515 in interest. The same amount over 15 years at 5.5% costs about $2,451.25 a month, or $652.60 more, but only about $141,225 in interest.

How it’s used

First-time buyers keeping payments affordable
Buyers in high-cost areas
Borrowers who want flexibility to prepay when they can

Strengths and weaknesses

Strengths

Lowest required monthly payment for a given loan amount
Easier to qualify for
Extra payments are usually allowed, letting borrowers pay faster by choice

Weaknesses

Highest total interest of the common terms
Equity builds slowly in early years
Rate is typically higher than on a 15-year loan

Educational information only, not financial, tax or legal advice. Rules, limits and rates change; check the IRS, your lender or plan, or a qualified professional before acting.