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5 Year Arm

15 Year Fixed

Today's Rates*

30 Year Fixed: 5.625%

15 Year Fixed: 5.375%

5 Year ARM: 6.0%

*Rates fluctuate and are not guaranteed. APR rates are NOT displayed.

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30 year fixed mortage

30 YEAR FIXED MORTGAGE IS DESIRABLE

Before we proceed to discuss the said topic, it is very essential that we understand the exact meaning of the word mortgage. Mortgage means to provide a fixed asset, normally land, as a security for obtaining a loan or a debt from any bank, financial institution, non-banking finance company etc. Thus, it can be said that mortgage is an act by which the person who intends to avail a loan from any institution, surrenders his property as a security for the money obtained. The mortgage is of many types.

There is equitable mortgage in which the title of the property is transferred to the institution providing the loan but the physical possession remains with the person obtaining the loan, better known as a borrower. In other types of mortgages, the title as well as the physical possession of the property is passed to the loan providing institution. Different countries have adopted different methods of mortgaging the land. Now the question arises is that what is the need of doing mortgage The answer is quite simple. The financial institutions provides loan on the basis of some realizable security so that in the event of the borrower not paying the borrowed money, the institution can recover the debt provided to the borrower by selling the said property.

In the present times, mortgage has become quite famous as everybody wants to have a nice built up home despite the fact that they dont have the required money. So a person gets his land or house mortgaged to a financial institution, gets the required amount of money, accomplishes his dreams and repay the loan as per the agreed terms. When the loan is fully repaid, the title of the land once again goes in the favor of the person who took the loan.

Period of mortgage

There are different maximum periods for which the land or house can be mortgaged and the loan can be availed. Generally the maximum period allowed for a mortgage is 30 years. If the mortgage has been done at fixed rates of interest for the period of 30 years, it is known as 30 year fixed mortgage. In such type of mortgage, the rate of interest is fixed throughout the tenure of the loan and thus it is not affected by the changes in the interest rates or the prime lending rates of the institution. The calculation of the interest is such that the money borrowed as well the interest is fully repaid in 30 years and after that the title of the land once again becomes clear. In this type of mortgage, the amount of loan installments is less as compared to a mortgage for a lesser period. Initially the borrower makes the payment for large amount of interest, which goes down as the borrower repays the loan. On the other hand, the loan for a shorter period attracts higher installment amount but the rate of interest is less as compare to mortgage for longer periods.

30 Year Fixed

To understand 30 year mortgage better, it is essential that we discuss the other common mortgage i.e. 15 year mortgage. No doubt a person who is buying home for the first time prefers to have a 30 year mortgage because of its lower installment amounts, but a person who has adequate means likes to have 15 year mortgage because he can quickly pay off his loan and get the title of the property back to his favor after the lapse of 15 years only. It has also been observed that on an average, the person who has opted 15 year mortgage repays about half his loan amount but a person who has opted 30 year mortgage, repays only about 15% of the loan amount. This is really a huge difference. Still, owing to its lower installment amounts, the 30 year fixed mortgage is quite popular among those who have not enough means to repay the loan at faster rate but who wish to have a home of their own.

Of course there is an option that a person who has opted for 30 year mortgage can switch over to 15 year mortgage by making extra installments, but it is not so if the person has opted for a 30 year fixed mortgage. Generally, in such type of mortgage, all the conditions of the repayment are agreed for a full period of 30 years. But there are some institutions that are giving relaxation in this option too.

30 Year mortgage interest rate trend

For the past four-five years, a rising trend has been observed in the interest rates of 30 year mortgage. If one wants to know about the current trend of such interest rate, it is around 6.79% in the United States in the month of July 2006. It has seen the rising trend since May, 2002. It has definitely risen for the past some years. There are many factors that affect the interest rates. The major factor being the hike in the interest rates by the central bank of the country. This high interest rates have direct impact over the number of person who takes loans for the purchase of home etc. As the rate of interest rises, the number of loan cases in the country decreases as people are not willing to pay higher rate of interest. Thus, it can easily be said that the number of persons going for the 30 year fixed mortgage has not increased in the expected manner.

Also, 30 year is a pretty long time as it envisages 360 months. It means that the borrower has to make continuous payments for 360 months and also has to wait for such a long period to get the title of the property in his favor.

It is also feared that in the coming times, the interest rates not only for the 30 year fixed mortgage but for other periods also would be observing an upward trend. But it is also estimated that it would not surpass 7 % mark.

30 Year fixed mortgage is desired

After going through the above discussion, it can be said that though the person pays higher rate of interest in 30 year fixed mortgage as compared to 15 year mortgage, but this option is still liked by the persons who dont have enough means to repay the loan at higher pace. In return, they have to wait for a longer period to get the property actually in their names.