30 Year Fixed

A 30 year fixed mortgage is the grand-daddy of them all, the basis of the whole market. In fact, when your grand-daddy was buying his first house this was probably the only type of mortgage there was. Fixed refers to the fact that the interest rate is set right at the beginning, so there will be no variations over the thirty year life of the loan.

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The advantage of a 30 year fixed rate mortgage is that it provides certainty and stability to your household finances. You know, absolutely, that whatever happens to interest rates or the rest of the economy, you will have to make the same payment each month for the next thirty years. That’s why 30 year fixed mortgages were so popular in the days of lifetime employment and still are today amongst those confident about their own future. If you know how much you will have coming in each month, and you also know what the mortgage payment is, you can start to budget and make long-term financial plans.

The second advantage of a 30 year fixed mortgage is that if interest rates rise then your payment is unaffected. You’ve simply removed one of the risks from your financial life. On the other side of the coin is the fact that if rates fall (which over the next 30 years is just as likely, at some point, as their rising) your payments will not go down. If that does occur, though, you can simply go ahead and refinance your mortgage to take advantage of the lower rates.