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Mortgage

5 Mortgage Types Explained With Real Numbers (30-yr, 15-yr, ARM, FHA, VA)

Picking the right mortgage isn’t only about the interest rate—it’s how the loan’s term, fees, and insurance change your monthly payment and lifetime cost. Below, we break down five common options with simple, realistic math. Use the free calculator at the end to model your own scenario.

Example home price used below: $400,000. Numbers are illustrative and rounded. Actual pricing varies by credit, down payment, points, and market conditions.

Table of Contents

The Quick Take

  • 30-year fixed: Lowest monthly payment; highest lifetime interest.
  • 15-year fixed: Much higher payment; massive interest savings and faster equity.
  • 5/6 ARM: Lower intro rate/payment; risk of higher payments after year 5.
  • FHA 30-year: Low down payment; upfront + monthly mortgage insurance.
  • VA 30-year: $0 down for eligible borrowers; one-time funding fee, no monthly MI.

Real-number snapshots (based on a $400,000 home)

To keep it apples-to-apples, we used these sample assumptions:

  • Conventional + ARM: 20% down (loan $320,000)
  • FHA: 3.5% down (base loan $386,000) + 1.75% upfront MIP financed
  • VA: 0% down (base loan $400,000) + 2.15% funding fee financed (first-use example)
  • Sample rates: 30-yr 7.00%, 15-yr 6.25%, ARM 6.50% initial (then 8.50% example), FHA 6.75%, VA 6.50%

What the monthly looks like (principal & interest only):

  • 30-yr fixed (20% down): ≈ $2,129/mo; total interest ≈ $446k over 30 years.
  • 15-yr fixed (20% down): ≈ $2,757/mo; total interest ≈ $177k over 15 years.
  • 5/6 ARM (20% down): ≈ $2,023/mo for first 60 months; if rate adjusted to 8.50%, payment ≈ $2,468/mo for remaining term (illustrative).
  • FHA 30-yr (3.5% down + financed upfront MIP): ≈ $2,509/mo P&I + ~$177/mo monthly MIP (0.55%/yr approx initially).
  • VA 30-yr (0% down + financed funding fee): ≈ $2,582/mo; no monthly MI.

Why the differences?

  • Term length drives payment and total interest (shorter = higher payment, far less interest).
  • Upfront/ongoing insurance or fees (FHA MIP, VA funding fee) change both starting balance and monthly cost.
  • ARMs start cheaper but can reset higher; understand caps and worst-case math.

Deep Dive: Each Mortgage Type

1) 30-Year Fixed

  • Who it fits: Buyers prioritizing the lowest payment and long-term stability.
  • Pros: Predictable payment; flexibility to make extra principal.
  • Cons: You pay the most interest over time; slower equity build.

Tip: Throw an extra 1/12th payment each month (or one extra payment/year) to cut years off the loan.

2) 15-Year Fixed

  • Who it fits: Strong income/cash flow; wants to kill interest and build equity fast.
  • Pros: Much lower lifetime interest; often a lower rate than 30-yr.
  • Cons: Higher monthly; may constrain budget/DTI.

Reality check: In our example, the 15-yr saves ~$269k in interest vs. the 30-yr—but costs ~$628/mo more.

3) 5/6 ARM (adjusts every 6 months after year 5)

  • Who it fits: Buyers expecting to move, refinance, or pay down principal before the intro period ends.
  • Pros: Lower intro rate and payment vs. same-day 30-yr fixed.
  • Cons: Rate risk after the fixed period; understand caps: first adjustment, periodic, and lifetime.

Plan: Know your break-even and your worst-case payment if the rate hits the cap. Budget for that number, not the teaser.

4) FHA 30-Year

  • Who it fits: Lower down payment, limited credit history, or higher DTI.
  • Pros: 3.5% down minimum; flexible credit; gift funds allowed.
  • Cons: Upfront MIP (1.75%) + annual MIP (added to monthly); on smaller down payments, MIP can last long-term.

Watchouts: Appraisal and property standards can be stricter; condos must be FHA-approved.

5) VA 30-Year (for eligible veterans/servicemembers)

  • Who it fits: Eligible borrowers seeking $0 down and strong terms.
  • Pros: No monthly mortgage insurance; competitive rates; flexible credit.
  • Cons: One-time funding fee (varies by use/down); can be waived for certain disability statuses.

Power move: Even with $0 down, consider small down payments to reduce the funding fee tier.

How to choose (simple framework)

  1. Payment comfort: Start with the highest payment you can comfortably make through a recession; then work backward.
  2. Time horizon: If ≤7 years, ARM can make sense (with a plan B). If long-term, fixed is safer.
  3. Cash on hand: If cash is tight, FHA or VA may win; if you have 20%+, conventional fixed often pencils best.
  4. Total 5-year cost: Compare not just rate, but points, MI, and potential ARM resets.
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