The Essential Guide To The 30-Year Fixed Rate Mortgage


30-Year Fixed Rate Mortgage: The Mechanics

For some people, stability is key in any big investment. The best bet for a mortgage for these people is a 30-year fixed rate mortgage. By far the most stable loan you can acquire, a 30-year fixed rate loan insures that your rate will not be influenced by market swings, unlike an adjustable rate mortgage. So, you will be paying the same amount for the life of the loan. But that is certainly not the only feature of a fixed rate mortgage.

SEE ALSO: Must Know Dangers of Adjustable Rate Mortgages

Benefits Of A Fixed Rate

Along with being shielded from market swings, people with a fixed rate mortgage can benefit from:

  • Less paperwork: fixed rate loans require less documentation than FHA or VA loans, speeding up the process
  • The best rates: these loans typically have lower interest rates and a lower APR
  • Refinancing: if a better APR comes along, you can refinance for a 20-year or 15-year term
  • Stable budgeting: you don’t have to worry about variations in your payments with this loan, so you can budget ahead for trips and other big investments

Drawbacks Of A Fixed Rate

A fixed rate mortgage is definitely not for everyone, especially those who can’t bear to see lower interest rates and APRs go by. Even those who have fixed rate mortgages sometimes regret the lower APRs that are offered later on. Other drawbacks include:

  • Refinancing for a lower rate means paying several thousand in closing costs
  • No early-on payment and rate breaks, making it expensive to buy at first
  • Mortgage loan offers are very similar, so you don’t have much choice on who to go with

What You’ll Need

If you do decide on a fixed rate, there are some requirements you’ll need to abide by. Requirements for a fixed rate mortgage change based on region, time of year, and a variety of other factors. Generally speaking, these are the accepted guidelines for a conventional fixed rate mortgage:

  • A loan amount of $417,000 or less for a single family home (regions where home prices are higher might have a higher cap)
  • A down payment of over five percent and preferably 20 percent or more
  • A good credit history with a credit score of over 740

SEE ALSO: Everything You Need To Know About Shopping For A Mortgage Loan

Is A Fixed-Rate Mortgage Right For You?

Whether a fixed rate mortgage is right for you is primarily decided by the amount of risk you’re willing to take. If you’re willing to take on more risk for lower payments over the life of your loan, an adjustable rate mortgage might be a better option for you. If you’re looking for more stability to plan out your future with more certainty, a fixed rate is probably your best option. Just be sure to research all your options before deciding on a home loan.

Date of original publication:
Updated on: October 27, 2016

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