As you might deduce from the name, fixed rate mortgages are loans in which the interest rate is set at the same rate for the full 30 year term of the loan. Among the most popular fixed rate mortgages is the 30 year fixed rate mortgage, which accounts for a large percentage of all home loan mortgages. Compared to an adjustable rate mortgage (ARM), the fixed rate mortgage is easy to understand and offers a consistent monthly payment which makes it simpler to budget monthly expenses.
One reason why the 30 year fixed rate mortgage is the best mortgage for most peoples needs is that, because of the longer term of the loan, the monthly payments are lower than one might find with a shorter term fixed rate loan, such as a 15 year fixed rate mortgage. Because the payments are spread over a longer term, less money is due every month and the borrower might be able to afford a more expensive property than they would otherwise be able to acquire with a shorter-term loan and higher monthly payments.
The downside of the 30 year fixed rate mortgage is that typically, because the term is longer, interest accrues on the principal of the loan for a longer period of time. Therefore, assuming that you stay in the house for the entire period of the loan and pay off the mortgage, the overall cost of the loan is higher over a longer term loan.
For many borrowers, however, this is not a major concern as they expect to move or refinance at some point before the 30 year term is completed. Additionally, the equity on the property can generally be expected to rise over a 30 year term, regardless of short-term fluctuations in the market. If you are planning to sell your home, or believe that you will stay in your home for a long time, then the 30 year fixed rate mortgage might be an appropriate choice for you.
