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What Is a 30 Year Fixed-Rate Mortgage?
What Is a 30 Year Fixed-Rate Mortgage?
A 30 year fixed rate mortgage is a very popular home loan option. It’s long term and fixed rate makes it attractive to many homeowners. However, is it the right mortgage for you? A 30 year fixed rate mortgage is a long term mortgage option, spanning 30 years, with the same interest rate for the entire life of the mortgage. Due to this, homeowners with a 30 year fixed rate mortgage will have payments that stay the same, allowing them to know exactly how to budget their finances every month.
Is a 30 Year Fixed Rate Mortgage Right For You?
Is a 30 Year Fixed Rate Mortgage Right For You?
To decide if a 30 year fixed mortgage is right for you, ask yourself these four things:
1. How Long Are You Planning On Staying In Your Home? If you’re considering getting a 30 year fixed rate mortgage, you should also be planning on staying in your home for more than 5-7 years.
2. Do You Prefer Your Monthly Mortgage Payment To Stay The Same? 30 year fixed rate mortgages are famous for having an interest rate that doesn’t change for the entire life of the loan, keeping your mortgage payments the same month-after-month, for 360 months.
3. Do You Want a Low Mortgage Payment? Due to the long nature of this loan, a 30 year fixed rate mortgage makes your monthly mortgage payments more affordable in comparison to shorter length fixed rate mortgages (like a 15 year fixed rate mortgage). You end up paying more interest over the 30 years, but the principal repayment is spread over that same time period, which gives you more manageable payment amounts.
4. Are You Purchasing or Refinancing? This mortgage option is great if you’re looking to buy a new home. However, if you’re looking to refinance your home that you already own at a lower rate, a 30 year mortgage may be too long for you. You may want to consider a shorter fixed mortgage term based on how much you can afford and what your mortgage refinancing goals are.
A 30 year fixed rate mortgage gives peace of mind to home buyers who choose it, whether they are first-time home buyers or just don’t want to worry about fluctuating mortgage payments.
Did You Know?
Did You Know?
As with most amortized loans, you pay off more interest (than principal) at the beginning of the 30 years of your fixed rate mortgage. As you pay your mortgage over time, this will slowly switch and you’ll reach a point where you’ll be paying more off in principal than interest. What this means is as you first pay off your 30 year fixed rate mortgage, your principal balance won’t decrease very much in the first couple of years, due to you paying off, mainly, interest. Once you begin paying off more principal in the later years, you’ll see your mortgage balance decrease faster.
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