What is a 30-Year Fixed-Rate Mortgage?
When most people think of a “home loan,” they immediately think of a 30 yr fixed mortgage. It is by far the most common and most sought-after class of home loans.
“30-year” refers to two things—both the term of the loan and the amortization schedule of the loan.
In other words, all the remaining principal is due in 30 years… but the balance of principal repayment and interest is carefully calculated so that after 30 years of monthly payments, 100% of the principal is paid down and the debt is retired, free and clear.
30-year amortization is popular because by spreading the loan repayment out over more time, the monthly payments get smaller. A mortgage starts to compare favorably to the rental rate on a similar home when spread out this long.
“Fixed-rate” refers to the fact that the interest rate does not change for the entire 30-year term of the loan. That means that for all thirty years—all 360 monthly payments—the interest rate remains the same, and so does the size of the payment. If you want predictable monthly payments, fixed-rate is the way to go.
Many loans issued or guaranteed by government agencies (i.e. FHA, VA, USDA, etc.) follow the rules of 30-year fixed mortgages, although the down payments and interest rates may be favorable by comparison.
30-year fixed-rate mortgages are ideal for homeowners who want to settle down in their home for ten years or more, increasing their wealth by paying down the loan principal while the property appreciates.
Choosing the right loan that matches your needs and getting the best rate for your specific situation can be a stressful and overwhelming process. We're here to help you go through the entire loan process in the smoothest way possible. Find out today's 30 yr fixed mortgage rates and get a free quote.
