Traditional mortgage loans are attractive to homebuyers for a variety of reasons. The main reason is security; choosing a mortgage loan with a fixed interest rate means your monthly payment amount will not change because of rising interest rates for the duration of your mortgage loan.
The disadvantage of a fixed rate mortgage is that if mortgage interest rates decline you will have to refinance to take advantage of lower interest rates. Many homebuyers choose a 30 year mortgage because mortgages with shorter term lengths come with higher monthly payments. While choosing a mortgage with a long term length will give you a higher interest rate, the monthly payment amount will be lower because the lender is giving you more time to pay the loan back.
If you plan on staying in your home for a long period of time a 30 year fixed rate mortgage may be the right loan for you. Your monthly payment amount will be fixed for the duration of the 30 year loan. This allows you to easily plan your monthly budget around your mortgage payment. There are circumstances you should know about where your monthly payment amount could change. If you pay your property taxes and insurance in escrow with your mortgage payment you will see increases as the taxes and insurance premiums go up. Your payment amount will not increase due to interest rate hikes.
My name is Robert Regehr and I’m a personal finance blogger with a chip on my shoulder for banks and mortgage brokers that take advantage of my friends and neighbors.
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