A 25-year mortgage may not be the most common home loan term, but it offers a nice middle ground between 15 and 30-year loans. With a 25-year fixed-rate mortgage, you’ll make payments for 25 years until the loan is paid off, with the same interest rate the entire time. This type of loan can be a good compromise if you want lower monthly payments than a 15-year mortgage but also want to pay the loan off faster than a 30-year term.
What is a 25 Year Mortgage?
A 25-year mortgage is simply a home loan with a 25 year repayment term. The vast majority of home loans issued in the U.S. are either 15 or 30-year terms, but some lenders offer 25-year mortgages as well. Like other fixed-rate mortgages, the interest rate is locked in for the entire life of a 25-year loan, so your principal and interest payments will remain the same each month until the loan is paid off.
With a 25-year mortgage, you’ll make 300 monthly payments over 25 years until the loan is fully repaid. This is halfway between the 180 payments on a 15-year mortgage and the 360 payments on a 30-year loan.
Pros and Cons of a 25 Year Mortgage
A 25-year fixed-rate mortgage offers a mix of advantages and disadvantages compared to 15 and 30-year home loans. Here are some of the key pros and cons to weigh:
Pros
- Lower monthly payments than 15-year loan
- Pay off mortgage faster than 30-year term
- Build equity quicker than 30-year mortgage
- Typically lower interest rate than 30-year loan
Cons
- Higher monthly payments than 30-year mortgage
- Slower to build equity than 15-year loan
- Not as common as 15 or 30-year terms
Lower Payments Than 15-Year Mortgage
One big advantage of a 25-year loan is that you’ll have lower monthly payments compared to a 15-year mortgage. Over the full loan term, you’ll make 120 fewer payments with a 25-year loan than a 15-year loan
For example, on a $250,000 mortgage amount, the principal and interest payment on a 3.5% 15-year loan would be around $1,675. On a 25-year loan at 3.528%, the payment would be approximately $1,004.
This lower monthly payment can make it easier to afford the mortgage payment each month. Just keep in mind you’ll be paying interest over a longer term.
Faster Repayment Than 30-Year Mortgage
While a 25-year mortgage doesn’t build equity as fast as a 15-year loan, it does help you pay off your home faster than a 30-year term. With a 25-year fixed loan, you’ll make 60 fewer monthly payments than a 30-year mortgage.
Over 25 years, you’ll pay off the full mortgage principal. On a 30-year loan, you’ll still have 10 years of payments left after 25 years. Those extra 10 years of payments add significantly to the total interest paid over the life of the loan.
Potentially Lower Interest Rate
Lenders typically price 25-year mortgages at around 0.125% to 0.25% less than a 30-year interest rate. This pricing difference reflects the lower risk to the lender from the faster loan repayment.
With a lower interest rate, you can save money on interest charges over the life of the 25-year loan. On a $250,000 mortgage amount, the 0.15% lower rate on a 25-year loan saves you over $5,100 in interest compared to a 30-year term.
Higher Payments Than a 30-Year Mortgage
While 25-year mortgage payments are lower than a 15-year loan, they are higher than a 30-year mortgage. Using the same example above, the principal and interest payment on a 3.575% 30-year mortgage would be around $907.
That’s about $97 per month higher than the payment on a 25-year loan. You’ll need to budget for that larger monthly payment, but the trade-off is paying the mortgage off faster.
Slower Equity Buildup Than 15-Year Loan
Because you’re paying the mortgage off over an additional 10 years compared to a 15-year term, it takes longer to build equity. After 10 years, a 25-year mortgage will still have a balance of around $140,000. A 15-year loan would be down to about $101,000 left after 10 years.
So while the 25-year mortgage builds equity faster than a 30-year loan, keep in mind it lags behind a 15-year mortgage. If rapid equity buildup is your priority, a 15-year term may be the better option.
Less Common Loan Term
The 25-year mortgage is simply not as widely available as 15 and 30-year home loans. Most major lenders offer 15 and 30-year fixed-rate mortgages, but only some provide 25-year options. So you may have to shop around more to find a 25-year loan.
Since it’s less common, resale value on a 25-year mortgage may also be lower than standard 15 and 30-year loans. But in general, a fixed-rate mortgage is attractive to buyers no matter the original term.
Is a 25-Year Mortgage Right for You?
There are a few situations where opting for a 25-year mortgage could make good financial sense:
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If you want lower monthly payments than a 15-year mortgage provides
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If you are looking to pay off your home faster than a 30-year term
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If being mortgage-free in 25 years is important to you
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If you value building equity quickly but can’t afford a 15-year payment
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If you plan to move before the loan is paid off, as resale may be easier than a 15-year mortgage
Of course, be sure to get rate quotes for all three loan terms – 15, 25, and 30-years. Crunch the numbers to see the payment and interest savings on each option. That will help determine if the 25-year strike the right balance for your situation.
How Much House Can I Afford with a 25-Year Mortgage?
Most lenders have the same debt-to-income requirements for a 25-year mortgage as other loan terms. Your total monthly debt payments, including the mortgage, usually cannot exceed 43% of your gross monthly income.
Exactly how much house you can afford will depend on factors like:
- Your income
- Other monthly debt obligations
- Size of down payment
- Credit score and history
- Interest rate offered
- Property taxes and insurance costs
I recommend using an online mortgage calculator to estimate your payment on a 25-year loan for different mortgage amounts. Make sure to include estimated property taxes, homeowners insurance, mortgage insurance (if needed), and HOA fees. See if the estimated payment fits within your target budget and debt-to-income ratios.
Getting pre-approved can also help give you a clear picture of the 25-year mortgage amount you qualify for. Pre-approval takes your specific financial details into account when making the affordability determination.
Should I Get a 25-Year ARM or Fixed-Rate Mortgage?
I strongly advise choosing a fixed-rate mortgage over an adjustable-rate mortgage (ARM), including for a 25-year term. With a fixed-rate loan, you lock in a set interest rate for the entire repayment period. This provides predictability, with your monthly principal and interest payments remaining the same over the life of the loan.
With a 25-year ARM, you usually have a fixed rate for the first 5-10 years. After that, the interest rate can adjust up or down annually based on market conditions. Your monthly payment amount can also go up and down each year as a result.
ARMs do carry the risk that rates spike after the initial fixed period, leading to much higher payments. Going with a fixed-rate 25-year mortgage eliminates that risk while still allowing you to pay off your home in 25 years.
25-Year Mortgage Rates
As mentioned above, 25-year fixed mortgage rates tend to be 0.125% to 0.25% lower than 30-year interest rates, on average. This reflects the lower risk of offering a mortgage that pays off faster. You can expect 25-year mortgage rates to be around 0.5% to 0.75% higher than 15-year fixed rates.
Over the past 5 years, here are the average 25-year mortgage rates compared to 15 and 30-year averages:
- 2018 – 25-Year: 4.40%, 30-Year: 4.54%, 15-Year: 4.00%
- 2019 – 25-Year: 3.69%, 30-Year: 3.94%, 15-Year: 3.39%
- 2020 – 25-Year: 2.86%, 30-Year: 3.11%, 15-Year: 2.60%
- 2021 – 25-Year: 2.71%, 30-Year: 2.96%, 15-Year: 2.27%
- 2022 – 25-Year: 5.08%, 30-Year: 5
Homes NOT in Designated High-cost Areas
The limits in the first row apply to all areas of Alabama, Arizona, Arkansas, Connecticut, Delaware, Georgia, 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.
| Units | 1 | 2 | 3 | 4 |
|---|---|---|---|---|
| Continental U.S. Baseline | $766,550 | $981,500 | $1,186,350 | $1,474,400 |
| Designated High-cost Areas | $1,149,825 | $1,472,250 | $1,779,525 | $2,211,600 |
| Alaska, Hawaii, Guam & U.S. Virgin Islands | $1,149,825 | $1,472,250 | $1,779,525 | $2,211,600 |
Historical 30-YR Mortgage Rates
The following table lists historical average annual mortgage rates for conforming 30-year mortgages. 25-year mortgages tend to be priced at roughly 0.15% lower than 30-year mortgages. 2023 data is through the end of November.
| Year | 30-YR FRM Rate | 30-YR Points | 15-YR FRM Rate | 15-YR Points | 15 vs 30 Rate Diff |
|---|---|---|---|---|---|
| 2023 | 6.81 | 6.11 | -0.70 | ||
| 2022 | 5.34 | 0.81 | 4.58 | 0.85 | -0.76 |
| 2021 | 2.96 | 0.68 | 2.27 | 0.64 | -0.69 |
| 2020 | 3.11 | 0.73 | 2.60 | 0.69 | -0.51 |
| 2019 | 3.94 | 0.5 | 3.39 | 0.5 | -0.55 |
| 2018 | 4.54 | 0.5 | 4.00 | 0.5 | -0.54 |
| 2017 | 3.99 | 0.5 | 3.27 | 0.5 | -0.72 |
| 2016 | 3.65 | 0.5 | 2.93 | 0.5 | -0.72 |
| 2015 | 3.85 | 0.6 | 3.09 | 0.6 | -0.76 |
| 2014 | 4.17 | 0.6 | 3.29 | 0.6 | -0.88 |
| 2013 | 3.98 | 0.7 | 3.11 | 0.7 | -0.87 |
| 2012 | 3.66 | 0.7 | 2.93 | 0.7 | -0.73 |
| 2011 | 4.45 | 0.7 | 3.68 | 0.7 | -0.77 |
| 2010 | 4.69 | 0.7 | 4.1 | 0.7 | -0.59 |
| 2009 | 5.04 | 0.7 | 4.57 | 0.7 | -0.47 |
| 2008 | 6.03 | 0.6 | 5.62 | 0.6 | -0.41 |
| 2007 | 6.34 | 0.4 | 6.03 | 0.4 | -0.31 |
| 2006 | 6.41 | 0.5 | 6.07 | 0.5 | -0.34 |
| 2005 | 5.87 | 0.6 | 5.42 | 0.6 | -0.45 |
| 2004 | 5.84 | 0.7 | 5.21 | 0.6 | -0.63 |
| 2003 | 5.83 | 0.6 | 5.17 | 0.6 | -0.66 |
| 2002 | 6.54 | 0.6 | 5.98 | 0.6 | -0.56 |
| 2001 | 6.97 | 0.9 | 6.5 | 0.9 | -0.47 |
| 2000 | 8.05 | 1 | 7.72 | 1 | -0.33 |
| 1999 | 7.44 | 1 | 7.06 | 1 | -0.38 |
| 1998 | 6.94 | 1.1 | 6.59 | 1.1 | -0.35 |
| 1997 | 7.6 | 1.7 | 7.13 | 1.7 | -0.47 |
| 1996 | 7.81 | 1.7 | 7.32 | 1.7 | -0.49 |
| 1995 | 7.93 | 1.8 | 7.48 | 1.8 | -0.45 |
| 1994 | 8.38 | 1.8 | 7.86 | 1.8 | -0.52 |
| 1993 | 7.31 | 1.6 | 6.83 | 1.6 | -0.48 |
| 1992 | 8.39 | 1.7 | 7.96 | 1.7 | -0.43 |
| 1991 | 9.25 | 2 | |||
| 1990 | 10.13 | 2.1 | |||
| 1989 | 10.32 | 2.1 | |||
| 1988 | 10.34 | 2.1 | |||
| 1987 | 10.21 | 2.2 | |||
| 1986 | 10.19 | 2.2 | |||
| 1985 | 12.43 | 2.5 | |||
| 1984 | 13.88 | 2.5 | |||
| 1983 | 13.24 | 2.1 | |||
| 1982 | 16.04 | 2.2 | |||
| 1981 | 16.63 | 2.1 | |||
| 1980 | 13.74 | 1.8 | |||
| 1979 | 11.2 | 1.6 | |||
| 1978 | 9.64 | 1.3 | |||
| 1977 | 8.85 | 1.1 | |||
| 1976 | 8.87 | 1.1 | |||
| 1975 | 9.05 | 1.1 | |||
| 1974 | 9.19 | 1.2 | |||
| 1973 | 8.04 | 1 | |||
| 1972 | 7.38 | 0.9 |
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 homes 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 2024 the FHFA set the conforming loan limit for single unit homes across the continental United States to $766,550, 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 $981,500, $1,186,350, and $1,474,400. 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.
Should I get a 30-year mortgage? | About That
FAQ
Can you get a 25 year term mortgage?
Can I get a mortgage for 25 years?
What is the current 25 year mortgage rate?
|
Term
|
Posted Rates
|
APR2
|
|
10 Year Closed
|
7.450%
|
7.460%
|
|
25 Year Closed
|
12.000%
|
12.010%
|
|
6 Months Open
|
9.850%
|
10.100%
|
|
1 Year Open
|
9.850%
|
9.980%
|
How much does a 25 year mortgage cost?
|
Interest rate
|
Mortgage term
|
Total interest cost
|
|
5.5%
|
25 years
|
£220,000
|
|
5.5%
|
30 years
|
£272,000
|
|
7.8%
|
25 years
|
£333,000
|
|
7.8%
|
30 years
|
£415,000
|
What is a 25-year mortgage?
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.
What is a 25-year fixed-rate loan?
A 25-year fixed-rate loan is a financing option that’s paid with a locked interest rate for 25 years. This means your monthly mortgage payments remain the same throughout the entire loan. Except for property taxes and mortgage insurance costs, you don’t need to worry about increasing monthly payments.
What is a 25 year fixed mortgage?
A 25-year mortgage is a term you might not typically see. With a 25-year fixed, you’ll pay off your home loan over 25 years instead of the standard 15 or 30 years. Since it’s a fixed mortgage, you can count on the same principal and interest rate for the life of the loan. How Do I Qualify For A 25-Year Fixed Mortgage?
What is a 25 year mortgage calculator with taxes?
25 year mortgage calculator with taxes is a mortgage amortization calculator that will calculate your monthly or biweekly payments with amortization schedule. The 25 Year Mortgage Calculator includes many built in options such as PMI, extra payment so that you can get all the details for your mortgage.
How much interest does a 25-year mortgage pay?
In this example, with monthly payments of $1,112 on a 25-year mortgage of $200,000 at 4.5% APR, your total interest paid by the end of the loan amounts to $133,499. In comparison, a 30-year mortgage results in lower monthly payments of $1,013 with a higher total interest paid of $164,813.