The 30-year mortgage has been the gold standard for American homeownership for decades, providing the average American the ability to afford buying a house by spreading the costs out across much of their adult life. Over the years, it has proven an enormously popular option for mortgages, accounting for approximately 90 percent of new mortgages in the U.S. in 2016.
Given how important the terms of a mortgage can be to a family’s financial health, potential homeowners need to find out what a good interest rate on a mortgage loan is. Here’s a closer look at representative mortgage rates you’ll find when searching for a 30-year mortgage. Keep reading to learn what the different rates can mean to the cost of the loan and what you should expect when you’re ready to take the next step in buying a home.
30-Year Mortgage Rates for Fixed-Rate Home Loans
Although different 30-year mortgage rates do rely on some factors that are the same for everyone — like interest rates and the yield on 10-year Treasury notes — other things like your credit score and how much money you have for a down payment will play into what rate you can get. When it comes to finding the best fixed-rate mortgage, however, it helps to start by researching the rates currently available.
Here are the 30-year mortgage rates offered by some of the most popular lenders:
|Lender||30-Year Mortgage Rate||30-Year Mortgage APR|
|Bank of America||4.625%||4.792%|
|JP Morgan Chase||4.625%||4.701%|
Rates accurate as of July 31, 2018.
The difference between the mortgage interest rate and the annual percentage rate reflects the additional fees and costs associated with a mortgage, meaning the APR represents a more accurate reflection of the total costs of the loan.
These are all examples of fixed rates, meaning that you can lock in your rate for the life of the loan. That’s different from variable-rate loans, for which the rate can change over time. Getting the fixed rate comes with less risk of seeing your rate climb as interest rates change, but a variable rate can be a beneficial choice if interest rates decrease during the life of the loan.
Small Rate Differences Can Save You a Lot of Money
At first glance, there might not be a big difference between rates offered by lenders, but even a small difference can make a big impact on the cost of the loan.
Looking at the sample rates, the difference between the largest and smallest rate is just 0.125 percent. Over the full course of a 30-year fixed-rate mortgage on a $600,000 home with 20 percent down, that 0.125 percent difference in rates can mean a big difference in what the loan will cost you.
The 4.625 percent interest rate in the above scenario would cost you $408,433 in interest over the course of 30 years, whereas the 4.750 percent rate would cost you $421,405 — a difference of approximately $13,000.
What Is a 30-Year Fixed Mortgage?
The 30-year mortgage originated during the Great Depression. Home loans used to require a whopping 50 percent down on the value of the home with just five years to pay back the remainder of the loan, and most loans were rolled over into another five-year loan at its end. With the collapse of the banking system at the end of the 1920s, however, banks stopped offering new loans and foreclosures spiked — approximately 250,000 households every year from 1931 to 1935 lost their homes.
A major push by the Roosevelt administration helped remake the mortgage industry, turning the 30-year mortgage into the new norm. These new, longer mortgages were more affordable and opened homeownership up to a much larger portion of the American population.
Over the decades, the 30-year mortgage has remained popular, with the length of the loan conveniently lining up with the typical length of a person’s career. Young borrowers can expect to continue paying off their mortgage over the course of their working years, finally paying the loan off in time to eliminate the expensive monthly payments before entering retirement.
Click through to learn how long it takes to buy a house.
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