Twenty-five year mortgages are common across many countries including the United Kingdom, Australia and Canada, however they are not particularly common across the United States. The above calculator is for fixed-rate mortgages. In many countries 25-year mortgages are structured as adjustable or variable rate loans which reset annually after a 2, 3, 5 or 10 year introductory period with a teaser rate.
The most common home loan term in the US is the 30-year fixed rate mortgage. The following table shows current 30-year mortgage rates in your local area. You can use the products menu to select loans of different durations.
Across the United States 88% of home buyers finance their purchases with a mortgage. Of those people who finance a purchase, nearly 90% of them opt for a 30-year fixed rate loan. The 15-year fixed-rate mortgage is the second most popular home loan choice among Americans, with 6% of borrowers choosing a 15-year loan term.
|Loan Type||Percent of Borrowers Buying a Home||Percent of All Home Buyers|
|Other Fixed-Rate Loan Terms||2%||1.76%|
|Use Any Type of Financing||100%||88%|
|Paid Cash in Full||N/A||12%|
Source: Freddie Mac's 2016 home buyer statistics, published on April 17, 2017
When interest rates are low (as they were after the global recession was followed by many rounds of quantitative easing) home buyers have a strong preference for fixed-rate mortgages. When interest rates rise consumers tend to shift more toward using adjustable-rate mortgages to purchase homes.
The following table shows loan balances on a $200,000 home loan after 5, 10, 15, 20 & 25 years for loans on the same home.
|Mortgage Type||25-YR FRM||30-YR FRM|
|Interest Rate (APR)||3.528%||3.575%|
|Monthly Principal & Interest||$1,004.25||$906.48|
|Total Monthly Payment||$1,508.41||$1,410.64|
|Loan Balance 5 Years||$172,730.47||$179,624.58|
|Equity Built, 5 Years||$77,269.53 + Appreciation||$70,375.42 + Appreciation|
|Remaining P & I payments||240||300|
|Loan Balance 10 Years||$140,208.65||$155,267.83|
|Equity Built, 10 Years||$109,791.35 + Appreciation||$94,732.17 + Appreciation|
|Remaining P & I payments||180||240|
|Loan Balance 15 Years||$101,422.90||$126,151.61|
|Equity Built, 15 Years||$148,577.10 + Appreciation||$123,848.39 + Appreciation|
|Remaining P & I payments||120||180|
|Loan Balance 20 Years||$55,166.80||$91,345.98|
|Equity Built, 20 Years||$194,833.20 + Appreciation||$158,654.02 + Appreciation|
|Remaining P & I payments||60||120|
|Loan Balance 25 Years||$0||$49,739.15|
|Equity Built, 25 Years||$250,000 + Appreciation||$200,260.85 + Appreciation|
|Remaining P & I payments||0||60|
|Total Interest Expense||$101,276.44||$126,334.03|
Please note the above used interest rates were relevant on the day of publication, but interest rates change daily & depend both on the individual borrower as well as broader market conditions.
The above calculations presume a 20% down payment on a $250,000 home, any closing costs paid upfront, 1% homeowner's insurance & an annual property tax of 1.42%.
The following table lists historical average annual mortgage rates for conforming 30-year mortgages. 20-year mortgages tend to be priced at roughly 0.25% to 0.5% lower than 30-year mortgages.
|Year||30-YR FRM Rate||30-YR Points|
Source: Freddie Mac PMMS.
Home buyers who have a strong down payment are typically offered lower interest rates. Homeowners who put less than 20% down on a conventional loan also have to pay for property mortgage insurance (PMI) until the loan balance falls below 80% of the home's value. This insurance is rolled into the cost of the monthly home loan payments & helps insure the lender will be paid in the event of a borrower default. Typically about 35% of home buyers who use financing put at least 20% down.
As of 2020 Congress set the conforming loan limit for single unit homes across the continental United States to $510,400, with a ceiling of 150% that amount in areas where median home values are higher. The limit is as follows for 2, 3, and 4-unit homes $653,550, $789,950, and $981,700. The limits are higher in Alaska, Hawaii, Guam, the U.S. Virgin Islands & other high-cost areas. Loans which exceed these limits are classified as jumbo loans.
The limits in the first row apply to all areas of Alabama, Arizona, Arkansas, Delaware, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Texas, Vermont, Wisconsin & most other parts of the continental United States. Some coastal states are homes to metro areas with higher property prices which qualify the county they are in as a HERA designated high-cost areas.
The limits in the third row apply to Alaska, Guam, Virgin Islands, Washington D.C & Hawaii.
|Continental U.S. Baseline||$510,400||$653,550||$789,950||$981,700|
|Designiated High-cost Areas||$765,600||$980,325||$1,184,925||$1,472,550|
|Alaska, Hawaii, Guam & U.S. Virgin Islands||$765,600||$980,325||$1,184,925||$1,472,550|
US 10-year Treasury rates have recently fallen to all-time record lows due to the spread of coronavirus driving a risk off sentiment, with other financial rates falling in tandem. Homeowners who buy or refinance at today's low rates may benefit from recent rate volatility.
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