The “typical” mortgage, if there is such a thing, is a 30-year loan at a fixed interest rate, with equal payments made monthly. This type of loan offers the security of a fixed payment amount that you can factor into your budget. The amount of the payment is allocated between interest and principal based on the declining balance of the loan; in the earlier years a larger part of the payment goes toward interest. (Your lender might calculate the interest using either the “30/360″ method, in which it is assumed that a year consists of 12 equal 30-day months, or the “actual number of days” method, in which interest is calculated more precisely based on how many days are in each month and exactly when your payment is received.) Some lenders have begun offering 15-year loans. A 15-year loan gives you the benefit of a shorter loan life, meaning you pay significantly less total interest on the loan. Since the loan term is shorter, however, you have to pay more each month–not double the amount of a payment on a 30-year loan, but significantly more, nonetheless.
For example, on a $100,000 loan at 10% interest, your monthly payment would be about $1,075 for a 15-year loan term, compared to $875 for the 30-year loan. However, the $200 difference in the monthly payment saves you over $120,000 in total interest. (These figures do not take into account any payments you would have to make each month to be put into escrow for property taxes and insurance.)