30 Year Fixed Mortgage Rates The Basics

For those of you who are new to mortgages or new to the process of applying for a home loan, this article will be a valuable resource to introduce you to the basic fixed rate mortgage. This is one of the easier mortgages to understand and also relatively easy to calculate. A basic understanding of the fixed rate mortgage will help you understand how other mortgage products may differ from the fixed rate, but also help you to ask intelligent questions when speaking with and evaluating a loan officer you may potentially be working with.

This fixed rate mortgage is one of the more common mortgage products. Typically when people discuss the need to get a home loan or a mortgage, or even a refinance, they’re often referring to the fixed rate mortgage. Typically when you hear an advertisement for a mortgage company or other lending institution, you’ll most likely hear rates quoted for a 30 year fixed mortgage. There are certain requirements when companies advertise mortgages that are based on a “truth in lending” act sponsored by the federal government. And although not followed directly in each state, when you hear ads for a specific rate, there should be an indication of what type of mortgage product that rate is associated with.

These fixed rate mortgages are most commonly setup with 15 or 30 year term, but also have options for a 10 year or 20 year, or even a 40 year mortgage. The longer the mortgage term, typically the lower the interest rate as the bank or financial institution that is extending the loan will typically make more money, at least via interest paid on the loan. This is why the shorter term rates are typically a higher rate.

One of the main advantages to the fixed rate mortgage is that the rate doesn’t change. This can be great as your payment may stay low for the duration of the loan even if inflation or other financial considerations may change over that same period of time. Some mortgage programs also have a bi-weekly payment option where you’ll pay your mortgage every two weeks. Assuming your monthly mortgage was $2000 per month, this is broken down to about $1000 every two weeks which is nice because it has two benefits, one benefit is that it matches some pay structures, i.e. many companies in the US typically pay your salary every 2 weeks. Of course this also means that instead of 12 payments of $2000 or $24,000 per year, you’ll pay $1,000 every other week which would be 26 payments (52 weeks per year / 2 (every other week)). The total amount of funds that would then contribute to your loan amount would be $26,000 which would pay down your loan more this way or reduce your overall payment amount. Consult your loan officer for details on the bi-weekly payment plan.

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.

The fixed rate mortgages often make the most sense when the owner will be in the home for the duration of the loan, or in a situation where the home is appreciating in value. The reason for this is that for the first 22 years of the loan (assuming a 30 year mortgage), you’ll be paying more in interest than you will in principal. This can be a bit disconcerting, but this also has the advantage that when you are able to submit additional funds toward the loan, these funds are applied directly to the principal. This is sometimes known as a mortgage acceleration program of which there are several types.

Getting a fixed rate mortgage is a good program for a large percentage of home owners in today’s society. Keep in mind, however, that this is not the only option. But, if you understand the basics of the fixed rate mortgage, you’ll better understand the other mortgage products that are available as they are explained to you by your loan officer. It’s important to find someone you can trust to work with on your home loan. This will get you most of the way to where you need to be for getting a mortgage or looking into refinancing.

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.