What does "Loan term" mean?

Definition

A loan term is the length of time you have to repay a loan, as specified in the loan agreement. Common mortgage loan terms are 15 or 30 years.

Understanding Loan Term Basics

The loan term is a key part of the mortgage process, usually decided early on with your lender. It affects monthly payments and total interest paid. In simple terms, it's the length of time you agree to pay back the loan. Example: A 30-year loan term means you'll make monthly payments for 30 years. It's not just about lower payments; a longer term might mean paying more interest over time. A common misconception is that the loan term is the same as the interest rate; it's not—they are separate factors that work together to shape your mortgage.

People Want To Know

What salary do you need for a $400,000 mortgage?

Lenders typically require an annual salary of $100,000 to $120,000 for a $400,000 mortgage. This amount depends on your down payment, interest rate, and other monthly debts.

Can I predict future mortgage rates?

Future mortgage rates depend on various economic factors such as inflation, Federal Reserve policies, and overall market conditions. Rates are subject to change based on these influences and cannot be accurately predicted.

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More From The Mortgage Glossary

Loan-to-value ratio (LTV)

The loan-to-value ratio, or LTV, is a number that compares the amount of your mortgage to the appraised value of the home. A higher LTV, typically over 80%, may require you to pay private mortgage insurance.

Loss mitigation

Loss mitigation is the process where a lender works with a borrower who is having trouble making mortgage payments. This can include options like loan modifications, forbearance, or deferment to help the borrower avoid foreclosure.

Manufactured home

A manufactured home is a type of housing built in a factory to federal standards and then transported to a home site. These homes are sometimes called mobile homes or prefabricated homes.