What Loan Terms Are Available on a Conventional Loan?

Conventional loans offer more term flexibility than almost any other mortgage type. From a 10-year fixed to a 30-year ARM, here is what is available and how to match the right term to your goals.

Fixed-rate conventional loans

Fixed-rate mortgages lock your interest rate for the full loan term. Principal and interest never change. Available terms:

• 30-year fixed: Most popular. Lower monthly payment, more interest paid over time. Best for buyers who want payment stability and plan to stay long-term.
• 20-year fixed: Middle ground — lower payment than 15-year, less interest than 30-year.
• 15-year fixed: Higher monthly payment but significantly less total interest paid, and typically a slightly lower rate than the 30-year. Popular for refinancers and equity-builders.
• 10-year fixed: Highest monthly payment; lowest total interest cost. Used primarily by refinancers with short remaining terms.

Adjustable-rate mortgages (ARMs)

ARMs offer a fixed rate for an initial period, then adjust periodically based on the 30-day average SOFR index plus a 2.75% margin. Available conventional ARM structures:

• 10/6 ARM: Fixed for 10 years, then adjusts every 6 months. Caps: 5/1/5.
• 7/6 ARM: Fixed for 7 years, adjusts every 6 months. Caps: 5/1/5.
• 5/6 ARM: Fixed for 5 years, adjusts every 6 months. Caps: 2/1/5. Not eligible for investors with multiple financed investment properties.

For ARMs with a 5-year or shorter initial period, the qualifying rate is the greater of the fully indexed rate or the note rate plus 2%.

Temporary buydowns

A 2-1 buydown reduces your rate by 2% in year one and 1% in year two, then returns to the full note rate. Buydown funds must be provided by the seller or real estate agent — the borrower cannot fund their own buydown. Borrowers are always qualified at the full note rate, not the reduced rate.