All You Need To Know About 30 Year Fixed Rates Mortgage Loans
What Is A 30 Year Fixed Mortgage Loan?
The 30 year fixed mortgage loan has an interest rate that remains the same throughout the loan period. For instance, if the mortgage loan is one for $300,000 with a down payment of 20 percent and a 3.75 percent interest rate, then the monthly repayments would be approximately $1,111 (not including cost for insurance or taxes). This means that the interest rate of the loan will remain at 3.75 and the monthly repayment will remain at the same amount for the duration of the loan.
What Are The Benefits To A 30 Year Fixed Mortgage Loan?
One of the most popular types of loans is the 30 year fixed rate mortgage loan, and for an excellent reason. The benefits of this mortgage loan include a steady monthly repayment schedule that does not alter because the interest rate of the loan remains the same throughout the loan period. The mortgage also presents with a relatively low repayment amount as compared to shorter-term mortgages.
For instance, using the $300,000 30 year mortgage loan with a 3.75 percent interest rate and 20 percent down payment, the approximately monthly repayment would be $1,111 for P&I not including insurance and taxes. If the homeowner opted for a 15 year fixed mortgage loan, the repayment amount would be approximately $2,062 per month. This is due to the fact that the longer loan term has a fixed monthly repayment amount than the shorter term; thereby, helping home buyers qualify for houses.
What Are The Drawbacks To A 30 Year Fixed Mortgage Loan?
The greatest drawback to using a 30 year fixed rate mortgage loan is its higher cost as compared to shorter-term mortgages. When compared to the 15 year home loan with fixed rates, the longer term loan is far more expensive. The cost is due to an increased interest rate on the longer term loan, as well as the need to pay more interest over a more extended period; therefore, you will be borrowing money and repaying money for twice as long. Moreover, by spreading the payments over 30 years as part of a 30 year fixed rate loan, you will build equity at a slower pace as compared to the 15 year fixed rate mortgage loan.
How Can I Locate The Best Mortgage Loan Rates?
Mortgage loan rates alter on a daily basis and will vary dependent on the borrower’s circumstances. The difference can range from thousands of dollars to hundreds of dollars over the loan term. Below are some of the best methods to locate the ideal mortgage loan rate for your new house loan:
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While you may be tempted to utilize the services of a lender who your real estate agents recommend, this does not always guarantee you will receive the best mortgage rate for a home loan. Before committing, it is advised that you compare the official loan estimates from a minimum of 3 different lenders; thereby, ensuring you receive a competitive mortgage interest rate.
2. COMPARE THE FEES
Finding the ideal mortgage loan requires more than looking for the best rates, it also requires comparing additional costs to the home loan such as fees. Always examine the lender’s fees and any closing costs to assess the overall cost of the mortgage loan. When applying for the home loan, a lender will provide you with a form called the ‘loan estimate’ that will make it simpler to compare total costs of the loan, including the fees.
3. INCREASING THE DOWN PAYMENT
Did you know the down payment amount can significantly impact the mortgage loan rate? This is typical because a mortgage rate is tiered and lower rates are can there for people paying a 20 percent or more down payment. This being the case, try to increase the loan down payment to gain lower rates.
4. IMPROVING A CREDIT RATING
A person’s credit rating is one of the most significant factors affecting the mortgage rate offered by different lenders. The rule of thumb is that the higher the credit rating or score, the lower the mortgage interest rate for the loan. Before making application for a home loan, it is recommended that you review your credit rating and improve it as much as possible.