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A 30-year fixed mortgage rate is an option that many people choose when buying a house. There are advantages and disadvantages to this type of mortgage. One advantage is that the monthly payment is lower than a 15-year fixed mortgage rate. Unfortunately when borrowing money, interest is always higher the longer it takes to pay off. The same is true with a 30-year fixed mortgage rate compared to say a 15-year fixed mortgage rate. For example, the monthly rate for the 30-year mortgage could be over a 300 dollar difference compared to the 15-year mortgage, but in the end you may be paying over 100,000 dollars more.
As a homebuyer, you need to ask yourself, which is better for you now? Do you have the money to pay off your new house in 15 years with higher monthly payments? Or do you need lower monthly payments to help put that money towards something else? What are your financial goals?
After seriously thinking about these questions, here is a fact, the majority of house buyers today do get a 30-year fixed mortgage rate because it is the longest length mortgage with the least amount of money to pay each month. Just because the majority does this, does not mean it may be right for you. Weigh all your options and consider a monetary adviser to help you make the best decision for you and your family.
Of course if you are worried about needed a “safety net” then a 30-year fixed mortgage may be best for you. This is why: you can pay more than your actual amount due each month to decrease your amount of debt faster but if something would happen in your life and money starts to get tight you have your lower monthly payments that you can start to pay the minimum amount again without going into more debt or backed up bills or worse yet lose your house.
Even with this “safety net” the mortgage calculator shows that you will still be paying more money in the long run with the 30-year fixed mortgage rate because of the interest rates. But of course the gap of the money difference paid decreases the faster you pay off your house. Talk to your financial adviser to help pick the right mortgage for you.
By Justice Homes 7-25-2016