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What Is A 30-Year Fixed Loan?

The traditional 30-year fixed rate mortgage has a fixed interest rate and monthly payments that never change. This is constant over the entire 30 year term of the loan. A 30-year fixed rate loan may be a good mortgage option if you plan on staying in your home for a long duration and do not intend on moving down the line.

Who Are 30-Year Fixed Loans Best For ?

The traditional 30-year fixed rate mortgage is primarily for people who want lower monthly payments while also having an interest rate that does not change over the entire term of the loan.

How Does A 30-Year Fixed Loan Work?

Your payments will always be the same. You will pay the mortgage off in 30 years, assuming you pay only pay the fixed mortgage payments each month. Due to the way an amortization schedule works, you’ll pay more interest over the life of the loan compared to a 15-year fixed loan or a 20-year fixed loan but your monthly payments will be lower since the payments are spread over a longer term.

Since your interest rate is locked for the entire term of your loan, your payments will never change. This stability in the payment is what appeals to many homeowners, along with a lower payment. However, if your taxes and insurance payments go up, then naturally your overall monthly payment will also go up.

30-Year Fixed Loan Benefits

  • Your monthly payments will generally be lower than a 20-year fixed loan or a 15-year fixed loan. This is entirely because the payments are spread over the term of 30 years rather than 20 years or 15 years.
  • You can pay additional above and beyond the required payment to accelerate payoff at any time. You can also pay off the entire mortgage at any time without incurring any prepayment penalties.
  • You may be able to qualify for a larger home purchase since the payments on a 30-year fixed are generally lower.
  • You may be able to avoid mortgage insurance with a down payment of at least 20%.
  • Your rate is locked for the entire loan. So no need to every worry about your rate going up.

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