Helpful Mortgage And Real Estate Advice

What Are The Advantages Of The 15 And 30-Year Fixed Rate Mortgages?

By on November 18, 2013 in Mortgage Programs, Mortgage Videos

Buying a new home is one of the biggest decisions that you will ever have to make. While most people focus on the decision of actually buying the home, an equally important decision is choosing the right mortgage. There are many different types of mortgages available, the two most popular of which are fixed and adjustable rate mortgages.

When looking for a new mortgage, there are many advantages that come with fixed rate mortgages. One of the advantages of a fixed rate mortgage is that the mortgage payment will never go up over time. When getting an adjustable rate mortgage, your initial loan payment will likely be lower than it would be with a fixed rate mortgage. However, if interest rates increase over time, you will see that you monthly payments will increase as well. If rates increase a lot, it could actually make your payments unaffordable and refinancing may not be helpful.

Along with the fixed payments, another advantage is that they payments will actually go down over time when factoring in inflation. If you have a fixed rate mortgage, your payment will be the same in year 30 as it would be in year 1. At the same time, inflation will likely add up considerably over time. Therefore, your mortgage payment will actually end up being much cheaper over time when you factoring in inflation.

While choosing a fixed rate mortgage may seem like a good option for most people, there are still other decisions to make as well. One decision is choosing the amortization, the most popular of which are fifteen and thirty year amortizations. There are advantages of both loan options.

One of the main advantages of a 30-year amortization fixed rate mortgage is that your payments will be lower. When you take out a 30-year amortization, the loan will be repaid over a much longer period of time. Therefore, your payments will be much lower. This will allow you to purchase a more expensive home or have extra cash flow to do with what you want each month.

An advantage of a 15-year mortgage is that you will spend far less money on interest over time. With a fifteen year mortgage, your interest rate will be much lower. Furthermore, you will be paying down the principal balance on the loan at a much quicker rate, which means that the accrued interest each month will be lower as well.

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About the Author

About the Author: Jessica Lucas is the managing editor for Mortgage Home Base, a top real estate finance blog dedicated to helping borrowers and home buyers understand the home loan process. Follow Jessica on Google +, and share your comments here. .
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