30 Year Fixed Mortgage Rates Offer Long-Term Security

2007-03-08 10:33:40

( Financial )



A good time to look for the lowest fixed rate mortgage is when prevailing mortgage interest rates are low. Fixed mortgages do not suffer from the effects of fluctuating interest rates. Thus, your monthly mortgage payments become predictable.

When you get a fixed rate mortgage, your lender will ask you to choose a repayment period (it could be 25, 30 or 40 years) that best suits your needs. 30 year fixed mortgage rates give you lower monthly payments than those of a 25 year fixed rate mortgage.

Remember that the total interest paid on 30 year fixed mortgage rates will be more than on shorter-term loans. Mortgage interest is tax deductible, however, thus your after-tax cost on interest is lower.

In the early years of either a 30-year or a 25 year fixed rate mortgage, you pay mostly interest. Going towards the end of the loan, your payments are mostly applied to principal. Hence, the ownership of your home shifts over time from your mortgage lender to you.

A 40 year fixed rate mortgage is one of the new fixed mortgages offered by lenders. Your monthly payments will even be lower if you choose 40 year fixed rate mortgage. But the difference in monthly payments from that of your 30 year fixed mortgage rates is just a few hundred dollars.

If in the later part of your loan life, the prevailing market interest rate will be much lower than at the time you took out your mortgage, you may consider refinancing. You can obtain a new mortgage to replace the existing one to benefit the lower interest rate. If you do this, be prepared to pay the closing costs and origination fee.

Although 30 year fixed mortgage rates do not give you flexibility, nonetheless, they are affordable. If you have a stable income, the predictability in your monthly payments gives you long-term security.


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