Mortgage Loan Terms Matter

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In early November, the media buzzed about President Trump’s proposed 50-year mortgage plan — a product that quickly faded due to higher rates, longer amortization, and limited investor appetite. What it did highlight, however, is the continued dominance of the 30-year fixed-rate mortgage, chosen by more than 80% of U.S. homebuyers. Many borrowers never consider a 15-year mortgage, even when it may be the better fit. That’s where Orion’s brokers can provide clarity.

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When lenders qualify a borrower, debt-to-income ratio (DTI) drives how much they can afford. Most lenders use two DTI calculations. The front-end ratio measures the new mortgage payment relative to monthly income, typically capped at about 28%. The back-end ratio includes all monthly debts and is commonly capped at 36% — though strong borrowers may be approved up to 45%. The borrower’s maximum loan amount is based on the lower of these two limits.

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One common misconception is that a 15-year mortgage simply results in half the interest cost of a 30-year. In reality, a 15-year payment can be roughly 45% higher, even though the loan is paid off in half the time. The loan term directly affects the payment amount and the speed at which the principal is repaid. A shorter loan term means the borrower will repay the principal more quickly, resulting in less total interest paid over the life of the loan. Understanding this trade-off is essential when helping borrowers evaluate long-term affordability.

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Choosing Between a 15-Year and 30-Year Mortgage: Understanding Monthly Payments

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A 15-year mortgage may be a strong fit if your client:

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• Can comfortably afford a higher monthly payment

• Has stable long-term employment

• Is nearing retirement and wants to eliminate mortgage debt sooner

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A 30-year mortgage may be more appropriate when:

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• Income or job stability is uncertain

• The borrower needs lower payments to build emergency reserves

• They prefer to invest extra cash flow elsewhere, such as retirement accounts or investment properties

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The interest-rate environment also influences the decision. When rates are low, borrowers may prefer the security of locking in a long-term rate with fixed rate mortgages, which are a type of conventional mortgage offering predictable payments and straightforward terms. Conventional mortgages, including both fixed rate and adjustable-rate options, remain the most common choices for borrowers. When rates are high, a shorter-term loan may minimize the amount of time they’re paying elevated interest — or they may start with a 30-year term and refinance into a 15-year later if conditions improve.

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Answering these questions and helping borrowers understand the true trade-offs of each mortgage term is exactly why working with an experienced broker is invaluable — far more effective than relying on automated calculators or generic online advice. Orion’s brokers continue to guide clients with clarity, strategy, and real expertise.

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