30-Year Fixed Mortgage

What Is a 30-Year Fixed-Rate Mortgage?

For most home buyers, the size of the monthly mortgage payment is one of the most important considerations when shopping for a new home. A 30-year fixed-rate mortgage has traditionally been one of the most popular mortgage options. These loans enable borrowers to stretch their payments over thirty years and offer the advantage of stability.

A 30-year fixed-rate mortgage enables you to own your home free and clear in 30 years, assuming you don’t miss any scheduled payments or pay ahead. “Fixed” refers to the interest rate, which does not change over the loan term. Your monthly payment will remain the same from the first year through the last.

What Are the Benefits of a 30-Year Fixed Mortgage?

Why do so many buyers choose to pay for their home over 30 years instead of a shorter time frame? The advantages of this loan type include:

  • Lower payments: Perhaps the most attractive feature of this mortgage type is the ability to stretch the payments out over an extended period of time. By doing so, you’ll have to repay less each month compared to choosing a 15-year or 20-year loan. Lower payments are especially helpful to first-time buyers who are beginning their careers and may not have significant income.
  • More house for your money: Since you’ll be spending less on mortgage payments each month and spreading them over a longer time period, you could qualify for a more expensive home.
  • Easier qualification: Lenders look favorably on the smaller payments that come with a 30-year mortgage, making it easier to get approved for a loan.
  • Simplified long-term planning: The predictability of a fixed monthly payment over three decades makes it easier for families to plan their financial future. By knowing how much you’ll spend on housing each month, you’ll also get a better handle on what you can afford for other expenses.

 

A Few Disadvantages of a 30-Year Mortgage

Because the lender must assume the risk for a longer period of time, 30-year mortgage interest rates are higher than those for shorter loan terms. Consequently, you will end up paying more for your home over the course of those 30 years.

Suppose you’re purchasing a $200,000 home with a down payment of $40,000. A 30-year loan with a 3.5% interest rate would result in a monthly payment of $718 (principal and interest) and a total cost of $298,649. In contrast, a 15-year mortgage at 3.0% would require a higher payment of $1,105, but your overall cost would only be $238,887 — saving you $59,762 in the long run.

Another potential drawback with a 30-year mortgage is that it takes longer to build equity, which is the difference between your home’s present market value and the amount you owe. There’s also the risk of overborrowing, as you might be tempted to purchase a more expensive property that’s harder to afford.

How to Pay Off a 30-Year Fixed-Rate Mortgage Early

One way to get around making mortgage payments for 30 years is to pay a little extra each month. Ask your lender for an amortization schedule, which shows how much you’d have to increase the monthly payment to pay off your mortgage in a shorter time frame, such as 15 or 20 years. You won’t be locked into this amount — you can still go back to making your regular payment if times get tough.

Ask About Our 30-Year Home Loan Rates

CIS Home Loans offers some of the most competitive 30-year mortgage rates along with white-glove concierge service to maximize your experience. With our fast turnaround times, we could have you at the closing table in as little as 25 days.

Apply for a 30-year fixed mortgage with CIS today!