Mortgage loan Rates 30 Year fixed
The 30-year fixed. The iconic, all-American mortgage. For probably the last 70 years or so, it’s been the most popular mortgage in the land. Nothing else has ever come close. All the fancy mortgages of the 2000s (e.g., interest-only, negative amortization, ARMs, etc.) might have gotten a lot of media attention, but they never were as popular as the 30-year fixed. Not even close.
Here’s a fact. Never, in the 30-year history of Quicken Loans, has any mortgage other than the 30-year fixed been our top seller. That might surprise some folks, but it really shouldn’t. The 30-year fixed is a best seller for many reasons. I’ll get into that in a second. For the record, two of my four mortgages were 30-year fixed. The other two were 15-year fixed. And also for the record, three of the four were VA loans, but that really doesn’t matter. Getting a 30-year fixed made a lot of sense for me. I’ll explain why in the pros of the 30-year fixed below. I’ll also explain why I might have benefitted from a different mortgage (benefitted = saved some money) in the cons of the 30-year fixed mortgage. Here we go.
Pros of the 30-Year Fixed Mortgage
So why is the 30-year fixed so darn popular? And why has it been for so many years? Here’s what you get when you choose a 30-year fixed:
- An affordable payment (relative to shorter-term mortgages), that won’t change over the life of your loan.
- You can buy a home with as little as 5% down (if it’s your primary home – investment home and vacation homes require a slightly larger down payment).
- You can qualify for loan amounts up to $3, 000, 000.
- You will have the peace of mind knowing you are choosing the mortgage that most Americans choose each year. There’s power in numbers, right?
Cons of the 30-Year Fixed Mortgage
- You pay a higher rate for a longer time than you need to. Most Americans move or refinance every 4 – 7 years (I’ve gotten four mortgages since 1998). Yet, instead of getting a lower rate with an ARM or a shorter term, they opt for a longer term. The longer your term, the higher the rate.
- It might not be the perfect loan term to match your goals. If you opt for the plain-old vanilla 30-year, you miss the chance to match your mortgage to your financial goals. Are you retiring from your job in 17 years? Maybe a 17-year fixed would be ideal. No job and no mortgage! Maybe your children will be starting college in 12 years. Get a 12-year fixed and be mortgage-free when they start phoning home for cash.
- You pay more interest. That’s a fact. It’s simple. The longer your mortgage, the more interest you’ll pay. You get a lower payment each month, but because you pay your mortgage over such a long time (and borrow the money over a long period), you pay more interest. Using a mortgage amortization calculator, you can see exactly how much more or less interest you pay based on the length of the term of your loan.
There you have it. The pros and cons of the 30-year fixed. Like I mentioned at the beginning of the post, I’ve had 30-year fixed mortgages twice. I’ve since refinanced to a 15-year fixed VA loan. Speaking of that, stay tuned for a post on the pros and cons of the 15-year fixed.
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I agree with Michael Cheng. If you have a great credit score, stable, verifiable income, verifiable cash on hand or assets, you are a dream client. By comparison shopping, you will be able to obtain a Loan Estimate from at least three different types of lenders: Talk with the mortgage department of where you currently bank. You already have a banking relationship with them. This is a good place to start. Next, apply with a local, licensed non-bank mortgage lender. Somebody located in the town in which you live. Last, apply with a local mortgage broker.