One of the most popular ways to finance a home purchase is with a 30-year fixed-rate mortgage. A 2010 Mortgage Bankers Association survey showed that about 95 percent of mortgage applications were for fixed-rate loans.
Definition of a fixed-rate mortgage
A 30-year fixed-rate mortgage is a home loan in which the interest rate and your monthly payments for principal and interest remain the same for the entire length of the loan. Monthly payments will only adjust if a change is made to your homeowners insurance or property taxes, or both if those items are paid with your mortgage each month.
Borrowers who opt for a 30-year fixed-rate loan will be given a table at their settlement that shows them the payment to be made for each month of their entire loan so that the balance is paid in full by the last payment.
Advantages of a fixed-rate mortgage
The most significant advantage to a 30-year fixed-rate loan is the certainty of the mortgage principal and interest payments, allowing the homeowners to budget more easily. In addition, a term of 30 years will keep the payments lower than a shorter-term loan and therefore more affordable. By using a mortgage calculator, finding out your fixed monthly payment allows you to budget accordingly.
