Most people think about the price, down payment, and closing costs when buying a home. In addition, obtaining the best “type” of home mortgage should also be at the top of your list.
One of the most popular mortgages is the fixed-rate mortgage, which comes in three common varieties. So read on, and we’ll explain why they are popular and the differences between 15-year, 20-year, and 30-year fixed-rate mortgages.
What Is a Fixed-Rate Mortgage?
When you apply for a mortgage, the most important thing to pay attention to is the interest rate. Also, understand whether the mortgage has a fixed or adjustable rate, which can make a significant difference throughout the loan.
With a fixed-rate mortgage, you pay the same interest rate over the entire loan term. However, with an adjustable-rate mortgage, the interest rate varies according to a specific benchmark.
Since fixed-rate mortgages don’t adjust with economic swings, lenders take on more risks with these mortgages. As a result, fixed-rate mortgages can have a slightly higher interest rate in the beginning than adjustable-rate mortgages. Still, they can save borrowers thousands of dollars over the loan term.
15-Year, 20-Year, and 30-Year Fixed-Rate Mortgages
15-year, 20-year, and 30-year fixed-rate mortgages are similar, except for the term and interest rate. Of course, the longer the term, the more risk the lender takes, so longer-term mortgages are slightly more expensive initially.
The 15-year mortgage is paid over fifteen years, the 20-year mortgage is paid over twenty years, and so forth.
The most common type of fixed-rate mortgage, and the most practical for many borrowers, is the 30-year fixed-rate mortgage. The longer, 30-year term results in borrowers paying more interest over a loan because of the time the principal is borrowed. However, the smaller monthly payments are more manageable for most borrowers, which makes the 30-year fixed-rate mortgage popular.
Why Fixed-Rate Mortgages?
Fixed-rate mortgages are a great choice for many borrowers because their mortgage payment does not change, except for taxes and insurance.
With a fixed-rate mortgage, homeowners know exactly how much they will pay each month and can budget their monthly finances accordingly. As a result, fixed-rate mortgages make buying a home possible for many people, especially with low and zero-down payment mortgages like FHA, USDA, and VA home loans.
Marimark Mortgage
Marimark Mortgage is based in Tampa, Florida, and proudly serves homebuyers and homeowners in all of Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing, and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us direct.
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