| There's a lot you can do in 30 years. Paying off your mortgage is one of them. Finding a mortgage that works for you can be a complicated, and overwhelming, process. Before calculating your budget for the various rates - 15 or 30 year, ARM or variable interest - consider the following tips:
Tip 1. Consider a 30 Year Fixed Rate Mortgage Loan Because…
The most obvious reason to consider such a mortgage is the locked in 30 year fixed interest rate. Unlike with adjustable rate mortgages, fixed rate mortgage payments remain the same for the life of the loan. In other words, you will have no surprises because the 30 year fixed interest rates on your loan will not increase or “adjust.” Your payment amount in year 10 will be the same as it was in year 2 of the loan.
Tip 2. 30 Year Fixed Rate Home Loans Can Potentially Save you Thousands in Interest
The 30 year fixed mortgage rates protect home owners from interest rate increases. No matter how much adjustable rates increase, fixed rates remain the same. The 30 year fixed rate home loan mortgages are especially attractive when interest rates are low. Anticipating increases, homeowners are essentially providing themselves long-term protection from forces that could potentially push mortgage payments beyond their budgets.
This scenario frequently plays out when borrowers get into homes at low adjustable “teaser” rates. When the teaser rate expires and the interest increases the subsequent payment increase often becomes unmanageable and the loan goes into default. The end result…foreclosure.
Even if homeowners with adjustable rate mortgages choose to refinance before the rate adjusts they must still pay the associated loan costs (or roll them into the loan).
Tip 3. 30 Year Fixed Rate Home Loans Can Help Homeowners Make Their Dreams Come True
A 30 year fixed mortgage rate allows homeowners to make smaller payments or “get more house” for their money because of the extended payment schedule. This leaves more money in their pockets for things such as:
- Education expenses
- Home improvements
- Monthly expenses
- Vacation
- A car or other big ticket item
Tip 4. A 30 Year Fixed Mortgage Rate is Not for Everyone
While it's true that 30 year fixed rate home loans offer a number of advantages, there are some drawbacks. For example, a 30 year fixed mortgage rate generally offers a lower monthly payment but a higher interest rate than what is available with a 15 year fixed rate mortgage.
Also, a 30 year fixed rates mortgage protects the homeowner when interest rates increase. When interest rates fall the home owner cannot take advantage of the more attractive rate without the expense of refinancing.
The 30 year fixed rate home loans are not usually the best choice for borrowers with credit challenges. With discipline and a good financial plan these borrowers can take advantage of the adjustable rate to get into a home. Before the rate adjusts, borrowers should diligently apply themselves to improving their credit report and score. Assuming the market cooperates, they can then refinance at a more attractive, maybe even 30 year fixed, mortgage rate.
Final 30 Year Fixed Rate Mortgage Tip…
The higher interest on an average 30 year fixed mortgage rate (when compared to a 15 year mortgage) may mean reduced federal tax liability; and lower tax bills are always a plus!
|
