Loan Options Explained: 30-Year, 15-Year, ARMs & Buydowns

The loan you choose shapes your payment, your total interest, and your risk. Here's how the main options compare — and who each one fits.

Which loan fits you?

  How long will you keep this home / loan?
        │                          │
   LONG (7+ yrs)              SHORT or unsure
        │                          │
  Want lower payment?         Want a lower early rate
    │           │             and can handle change later?
   YES         NO                    │
    │           │                   ARM (e.g. 5/6, 7/6)
  30-yr       15-yr
  fixed       fixed

  Rates high right now but expected to fall?
        └────────▶  Consider a temporary buydown (2-1 or 1-0)

Fixed-rate loans

30-year fixed — the same rate for the whole loan.

✅ Lowest, most predictable payment; simple.
❌ Most total interest over time.
Fits: buyers who want stability and payment flexibility.

15-year fixed — paid off in half the time.

✅ Much less total interest; usually a lower rate than the 30-year.
❌ Significantly higher monthly payment.
Fits: buyers with strong cash flow who want to own free-and-clear sooner.

  Same $500,000 loan (illustrative):
    30-yr @ 6.5% → lower payment, ~$640k interest over the life
    15-yr @ 5.9% → higher payment, ~$255k interest over the life
  (Actual rates vary — this shows the pattern, not a quote.)

Adjustable-rate mortgages (ARMs)

An ARM has a fixed period, then the rate adjusts periodically. A 7/6 ARM is fixed for 7 years, then adjusts every 6 months.

✅ Lower starting rate than a fixed loan.
❌ Payment can rise after the fixed period (caps limit how much).
Fits: buyers confident they'll sell or refinance before the adjustment — and who understand the caps.

Always check the caps: initial adjustment cap, periodic cap, and lifetime cap.

Temporary buydowns

A buydown uses an upfront credit (often from the seller) to lower your rate for the first year(s), then it returns to the note rate.

2-1 buydown — rate is 2% lower in year 1, 1% lower in year 2, full rate from year 3.
1-0 buydown — rate is 1% lower in year 1, full rate after.
Fits: buyers who want breathing room early, or a negotiating tool in a slower market. Best when you expect income to rise or plan to refinance if rates fall.

Loan types you'll also hear about

Conventional — not government-backed; 3%+ down for qualified buyers.
FHA — lower credit/down-payment thresholds; carries mortgage insurance.
VA — for eligible veterans; often $0 down, no PMI.
Jumbo — above conforming limits (common in higher-priced CA markets).

Comparison at a glance

Option	Starting payment	Total interest	Risk	Best for
30-yr fixed	Lower	Higher	Low	Stability, long stay
15-yr fixed	Higher	Much lower	Low	Fast payoff, strong income
ARM (7/6)	Lowest fixed-period	Depends	Medium	Short stay / plan to refi
2-1 buydown	Lowest early	Same note rate	Low–med	Early relief, expect refi

Choosing checklist

Estimated how long you'll keep the home
Compared payment and total interest, not just rate
For ARMs: read the caps and the first adjustment date
For buydowns: confirmed who pays and the rate after
Checked eligibility for FHA/VA/conventional
Got Loan Estimates to compare real costs

Resources

General education, not financial advice. The right loan depends on your finances, the property, and current rates — compare options with your lender.