30 Year Fixed Rate Mortgage
The 30-year fixed home mortgage is the definitive housing loan that most people think of when buying a house. This traditional home loan is the most common choice these days, offering a stable monthly mortgage payment for the length of the loan. For residents here in the Chambersburg, PA area and surrounding boroughs, this popular mortgage can be a great home financing option.
How Does the 30-Year Fixed-Rate Home Mortgage Work?
The 30-year fixed mortgage loan carries a dependable, fixed interest rate so that the monthly payments are always predictable and steady for borrowers. Although the mortgage payment remains the same over the entire loan, the breakdown changes over time. At the beginning of the mortgage, most of your monthly payment goes toward interest on the loan.
As your payments continue, the portion credited to principal gradually increases, while the amount allotted to loan interest goes down. Near the end of the mortgage, most of your monthly house payment goes to the principal and only a small portion to interest. You’ll build equity much faster towards the end of the loan’s term.
30-Year Fixed-Rate Mortgage Advantages
This fixed mortgage offers you predictable payments, with no surprise increases, so you can easily plan your budget. Perhaps the best 30-year fixed mortgage benefit is that you get a lower monthly payment than you would with a shorter loan, such as a 15-year fixed mortgage. This allows you to save for those unpredictable expenses that can come up, such as car repairs or other financial emergencies.
History of the 30-Year Mortgage
Prior to the introduction of the 30-year fixed-payment mortgage, people were offered home loans lasting only 3 – 5 years, with a variable interest rate. The borrower’s payments generally covered the loan’s interest only. At the end of the mortgage term, homeowners would owe a large, lump-sum payment. To avoid this balloon payment, most people had to take out new loans every 3 – 5 years. Many defaulted on these troublesome mortgages during the Depression Era.
In the mid-1930s, the government came to the rescue with the FHA, which created and guaranteed longer-term loans. With these new loans, interest rates were fixed to help eliminate the uncertainty of variable monthly payments. Now, part of each payment went to principal, building homeowner equity, and part went to interest for the bank’s profit. This Federal support allowed banks to begin offering longer mortgage terms, including 30-year fixed-rate home loans, making the dream of homeownership possible for more average Americans.
Who is the Best Fit for the 30-Year Fixed-Rate Mortgage?
If you’re a first-time homebuyer, spreading payments over 30 years gives you budget flexibility that could let you get into your first home at an earlier age. The reasonable monthly house payment leaves you with funds for all the other essentials of life. You can use your other income to pay off higher interest credit cards or invest, for example. The fixed 30-year home loan also lets you keep your payment low for decades to come. Whether you consider this your forever home or plan to sell and trade up (or downsize your home) later in life, the 30-year fixed mortgage could be ideal.
How to Apply for a Stress-Free 30-Year Fixed Mortgage
When you’re ready to apply for your 30-year fixed home loan, Homespire Mortgage is here to assist you. We believe in making the application process simple and stress-free for local residents in the Chambersburg area of PA. We serve multiple boroughs of Franklin County, including Greencastle, PA, Fayetteville, PA, Mont Alto, PA, Shippensburg, PA, Mercersburg, PA, and Waynesboro, PA. Homespire can help you decide if a 30-year fixed-rate home loan is right for your needs. We offer many other mortgage options to make homebuying easy.