30 Year Home Loans, 30-Year Fixed Loans Offer a Fixed Interest Rate and Lower Payments Spread Over 30 Years

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30-year fixed loans offer a fixed interest rate and lower payments spread over 30 years

Who 30-Year Fixed Loans Are Best For
People who want lower monthly payments and an interest rate that never changes over the entire life of the loan. Read more about other benefits below.

How 30-Year Fixed Loans Work

You’ll pay off your mortgage in 30 years. Although you’ll pay more interest over the life of the loan compared to a 15-year fixed loan, your monthly payments will be lower.

Because your interest rate is locked for the life of your loan, your principal and interest payments won’t change over the life of your loan. The amount for your taxes and insurance can go up and down.

You may have to pay for mortgage insurance, depending on your down payment amount if you’re buying a home, or how much equity you have if you’re refinancing.

What You’ll Need To Qualify For A 30-Year Fixed Loan

A minimum 3% down payment.
A minimum FICO® Score of 620.
A debt-to-income ratio (DTI) of no more than 50%. Estimate your DTI by adding your monthly debt payments (such as credit card and car payments) and dividing the total by your monthly income before taxes.
Money to cover closing costs, which are about 2% – 6% of the purchase price.

30-Year Fixed Loan Benefits

Your monthly payments will be less for a 30-year fixed loan than a 15-year fixed loan, even though interest rates for a 15-year fixed loan are generally a little lower. That’s because your payments will be spread out over a longer period.
You can pay off your mortgage at any time without prepayment penalties.
You may be able to avoid mortgage insurance with a down payment of 20% or higher.
Your interest rate is fixed for the life of the loan, so you don’t have worry about rates rising.
You can buy your primary home with as little as 3% down.
You can refinance your primary home for up to 97% of its value.

Mortgage Insurance Requirements

You’ll have to pay primary mortgage insurance (PMI) if your down payment is less than 20%.

This typically costs between 0.5% and 1% of your loan amount per year, spread over 12 payments.
Once you reach 20% equity in your home, you may be able to request to cancel PMI.
PMI is often cancelled automatically once you reach 22% equity.

It used to be the first choice of most borrowers, because since the total payments are spread over a longer period of time with the interest rate set for the entire time of the mortgage. 30 year home loan rates are an industry standard but is it the right choice for you?

The 30 year home loan is an industry standard, but is it the right choice for you? Because the total payments are spread over a longer period of time and the interest rate set for the entire time of the mortgage. This was the first choice of most home owners.

As we mentioned, the plus side for a 30 year home loan is lower monthly payments. This attraction is somewhat dimmed by the fact that you pay thousands extra in interest. But, your interest is 100% tax deductible which does lower your after tax cost. It offers you some flexibility so that if your financial situation changes and you have more money you can pay it off in less than 30 years, this while keeping the low monthly payments. Your payments are smaller so in reality you can purchase a larger roomier home.

To show an example of the interest difference between 30 year home loan rates and one of the other rates. On a 30 year, 100,000 dollar loan using 7% interest rate your monthly payment of interest and principle would be $665.30 dollars. Over the next 30 years you will have paid $139,511.04 in interest alone. Now with a 15 year home loan rate on the same amount you will pay $871.11 per month and over the next 15 years, you would pay $56,799 in interest. This would save you $82,712 dollars.

If you have the will power to invest the savings from the monthly payments, it still could be a good choice to go with the 30 year mortgage. Especially if you can find an investment that the long term payoff matches or exceeds what you would save in a 15 year mortgage. Another factor to consider is how fast you want to accrue equity in your home or to own it out right. 30 year home loan rates take much longer to build equity.

30 year home loan rates are certainly attractive and the vast majority of home buyers get 30-year loans because that is the longest home loan available today. Experts agree if they could get a 35- or 40-year loan, they probably would. There are many other options to consider. Probably the biggest question you have to ask yourself when considering a loan is what are your financial goals? What loan plan will help you the most to reach that goal? It is clearly to your advantage to look into other loan options for the best loan available for you and your financial goals. It may surprise you that because of your personal situation there may be other plans more suitable for you.

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