The number of years you have to pay off your mortgage. Most common are 30, 20, and 15 years — shorter terms have higher monthly payments but less total interest paid.
The loan term is just how long you have to pay off the loan. The most common terms are 30, 20, and 15 years. The 30-year is the default for most buyers because it spreads payments out longer and keeps the monthly amount affordable.
Shorter terms come with two trade-offs. The payment is higher because you're paying the same principal back faster. But you pay far less total interest, and you build equity faster. A 15-year mortgage typically costs only about 30-40% more per month than a 30-year on the same amount — but saves you hundreds of thousands of dollars in interest over the life of the loan.
Example
A $320,000 loan at 6.5% costs $2,022/month on a 30-year — $727,840 total over 30 years. The same loan at 5.85% (15-year rates are typically lower) costs $2,672/month on a 15-year — $480,960 total. You'd save $246,880 in interest by choosing the 15-year.
Also known as
term, loan length, mortgage term