A 30-year fixed-rate mortgage is one of the most popular loan options for many homebuyers. As the name suggests, it means paying back the mortgage over 30 years, with an interest rate that will never change throughout its term.
If you’re thinking of financing your home purchase with a 30-year fixed-rate loan, mortgage lenders in Oak Ridge suggest learning more about its pros and cons. This is to determine if this popular option is also right for you.
- Smaller monthly payment. When compared to a 15-year fixed-rate mortgage, a 30-year loan is a more affordable monthly payment. This is because the payback period is longer, stretching over 30 years. Smaller payments can be a great help if you have smaller income or have other expenses needed to be paid.
- Predictable and flexible. As its interest rate remains the same for the entire 30 years, there won’t be any changes in your monthly payment. This stability will help you manage your budget better, knowing that your loan payments will be the same each month. You can also pay your loan faster if you can, because of the lower payments. Simply make sure that there is no prepayment penalty.
- More interest. While your rates will never change, your total interest will be higher with a 30-year fixed-rate loan. This is because the payment period stretches over a long period of time. If you, on the other hand, choose a 15-year fixed-rate loan, you’ll owe less interest, as the payback period is significantly shorter.
- Might not match your goals. As you will need to pay back the loan for 30 years, it may coincide with your other plans like retirement and sending off kids to college. It is best to consider your life plans and goals before finally choosing this loan term.
When deciding if a 30-year fixed-rate mortgage is right for you, talking to a reliable lender can help. You may also want to learn more about other loan programs that can suit your finances, preferences, and life goals.