There are several different mortgage products on the market that are ideal for a range of different home buyers. In the United States, the 30 year mortgage fixed rate loan is by far the most popular option. This isn’t by accident as this mortgage offers some very important features that are a good match for the financial needs of many home buyers.
It is estimated that approximately 85% of all new home purchases are made using the 30 year fixed mortgage. There is a 15-year fixed rate mortgage loan as well, but the higher monthly payments tend to create problems for some home buyers that are not an issue with the 30 year version.
Lower, Consistent Monthly Payments
As the 30-year mortgage fixed rate name implies, this mortgage will entail monthly payments over 30 years that are set at the current mortgage rate. With this 360-month payment plan, homeowners can budget 30 years in the future and know exactly what the payments will be.
Because the loan term is so long, the payments can be very low—even when a loan amount might be very high. While there is more interest paid over the term of the mortgage, the lower monthly payments can offset this to make home ownership affordable for couples who may not be able to pay the higher 15 year fixed rate monthly payments.
If the fixed rate on a 30 year mortgage is higher than the current market, it is possible to refinance. Depending on when this occurs and how the homeowner’s finances may have changed, moving into a 15 year fixed rate may be a smart choice during the refinancing period.
The key is in choosing the mortgage that makes the most sense for you. The homeowner needs to consider other bills, loan repayments, insurance and the cost of living to determine which term on a fixed rate mortgage offers the right solution for their financial situation.
To talk to a loans expert about the advantages of a 30 year mortgage fixed rate through Guaranteed Rate, see us online.
