30 Year Fixed Mortgage Rates The Basics
If you are new to mortgages or just don't remember going through the process the last time you financed a home purchase, this article will explain some important features of the loan known as the fixed rate loan or fixed rate mortgage. These are pretty easy to come by and the product that is the most familiar to people purchasing or refinancing homes. A purchase of a home is most likely the largest outlay of funds you'll experience during your life, so understanding the fixed rate mortgage is important knowledge to have.
The fixed rate mortgage is by far the most common type of mortgage. When new homebuyers begin pricing loans, these are typically where people will start. Most fixed rate mortgages advertised also usually talk about the rate for a 30 year "fixed" rate. When people talk about their mortgage, there is a very good chance that they are referring to their 30 year fixed. A little less common are the adjustable rate mortgages. Of course there are dozens of different mortgage products available based on the needs you have. Interesting that the selling of "money" is basically packaged in different forms just like any other product or service.
The fixed rate mortgages have a specific time period with them, such as a 30 year fixed rate mortgage. There are also 15 years which are probably the second most common. I have also seen 20 year and 40 year mortgages. Lenders have different programs that will work with what you are looking for. There are enough lenders out there that it would be uncommon to find a loan officer who couldn't give you multiple options with your loan duration.
One of the main benefits to the fixed rate mortgage is that your monthly payment won't change for the duration of the loan. In many companies in the US, you'll also have the advantage of being paid every 2 weeks. If you setup your mortgage to work on this same two week payment schedule, you'll end up making 26 payments per year (52 weeks per year / 2 for every other week) which is the equivalent of 13 months of payments instead of 12 months. Of course this option can be worked out at the time you're applying for your loan as well.
There are several loan products or mortgage programs that have what is known as a "balloon" payment where payments are made either directly to the interest as in the case of an interest only loan or even interest and principal with a lump sum due at the end of a given period (usually a couple of years). The fixed rate mortgage is different in this regard, at least the traditional style of mortgage here this article discusses. When you pay off your mortgage with a fixed rate mortgage, you owe nothing more to the bank or lender. There is no need to refinance your home or come up with cash to pay towards a lump sum payment or balloon payment. This style of mortgage is probably the most conservative of the various mortgage products.
With a fixed rate mortgage, a percentage of your payments each month will go towards the interest and the rest will go towards the principal. This is not an even amount. What I mean is that the the first few years of your mortgage, the majority of the monthly payment goes to pay the interest and the smaller percentage goes towards the principal. Of course you can make extra payments on the principal which means the interest payment will decrease simply because the interest paid is done so on the balance, which if you pay more towards the principal above and beyond the monthly payment, there will be a lower balance due and less interest. This doesn't mean your monthly payment will change, but it will decrease the amount of interest due and increase the percentage of your payment that is applied to paying down the principal.
Establishing your first fixed rate mortgage or even refinancing for the 10th time shouldn't be a complicated process. The key to getting this done is to find a loan officer you can trust who will work with you and educate you as needed so that you understand what you're paying for. Because this is such a large dollar amount that you'll typically be paying for a home, there are ways that you can get caught paying more than you should and even small percentage changes over the life of the loan may result in you paying thousands of dollars more in interest. There are a lot of mortgage calculators out there as well you can use to give you some rough estimates.
The fixed rate mortgage is by far the most common type of mortgage. When new homebuyers begin pricing loans, these are typically where people will start. Most fixed rate mortgages advertised also usually talk about the rate for a 30 year "fixed" rate. When people talk about their mortgage, there is a very good chance that they are referring to their 30 year fixed. A little less common are the adjustable rate mortgages. Of course there are dozens of different mortgage products available based on the needs you have. Interesting that the selling of "money" is basically packaged in different forms just like any other product or service.
The fixed rate mortgages have a specific time period with them, such as a 30 year fixed rate mortgage. There are also 15 years which are probably the second most common. I have also seen 20 year and 40 year mortgages. Lenders have different programs that will work with what you are looking for. There are enough lenders out there that it would be uncommon to find a loan officer who couldn't give you multiple options with your loan duration.
One of the main benefits to the fixed rate mortgage is that your monthly payment won't change for the duration of the loan. In many companies in the US, you'll also have the advantage of being paid every 2 weeks. If you setup your mortgage to work on this same two week payment schedule, you'll end up making 26 payments per year (52 weeks per year / 2 for every other week) which is the equivalent of 13 months of payments instead of 12 months. Of course this option can be worked out at the time you're applying for your loan as well.
There are several loan products or mortgage programs that have what is known as a "balloon" payment where payments are made either directly to the interest as in the case of an interest only loan or even interest and principal with a lump sum due at the end of a given period (usually a couple of years). The fixed rate mortgage is different in this regard, at least the traditional style of mortgage here this article discusses. When you pay off your mortgage with a fixed rate mortgage, you owe nothing more to the bank or lender. There is no need to refinance your home or come up with cash to pay towards a lump sum payment or balloon payment. This style of mortgage is probably the most conservative of the various mortgage products.
With a fixed rate mortgage, a percentage of your payments each month will go towards the interest and the rest will go towards the principal. This is not an even amount. What I mean is that the the first few years of your mortgage, the majority of the monthly payment goes to pay the interest and the smaller percentage goes towards the principal. Of course you can make extra payments on the principal which means the interest payment will decrease simply because the interest paid is done so on the balance, which if you pay more towards the principal above and beyond the monthly payment, there will be a lower balance due and less interest. This doesn't mean your monthly payment will change, but it will decrease the amount of interest due and increase the percentage of your payment that is applied to paying down the principal.
Establishing your first fixed rate mortgage or even refinancing for the 10th time shouldn't be a complicated process. The key to getting this done is to find a loan officer you can trust who will work with you and educate you as needed so that you understand what you're paying for. Because this is such a large dollar amount that you'll typically be paying for a home, there are ways that you can get caught paying more than you should and even small percentage changes over the life of the loan may result in you paying thousands of dollars more in interest. There are a lot of mortgage calculators out there as well you can use to give you some rough estimates.
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Did you find this article interesting at all? If so, I have a website that is dedicated to mortgages in Utah that covers not only the basics for the state of Utah, but mortgage information in general as well. You can also review additional information about mortgages from Brian's other website about Salt Lake City Mortgages.