30 Year Fixed Mortgage Rates The Basics

For those of you who are new to mortgages or new to the process of applying for a home loan, this article will be a valuable resource to introduce you to the basic fixed rate mortgage. This is one of the easier mortgages to understand and also relatively easy to calculate. A basic understanding of the fixed rate mortgage will help you understand how other mortgage products may differ from the fixed rate, but also help you to ask intelligent questions when speaking with and evaluating a loan officer you may potentially be working with.

These fixed rate mortgages are the most common type of mortgage product. They are not the only type of product, of course, by they are very prevalent. When people speak about getting a home loan, they are usually referring to this type of loan. The fixed rate mortgage product is the one that is probably advertised the most, at least with most state laws, the advertising you’ll here on the radio or see on TV or other media is typically providing information about their lowest fixed rate product.

The fixed rate mortgages have a specific time period with them, such as a 30 year fixed rate mortgage. There are also 15 years which are probably the second most common. I have also seen 20 year and 40 year mortgages. Lenders have different programs that will work with what you are looking for. There are enough lenders out there that it would be uncommon to find a loan officer who couldn’t give you multiple options with your loan duration.

One of the main advantages to the fixed rate mortgage is that the rate doesn’t change. This can be great as your payment may stay low for the duration of the loan even if inflation or other financial considerations may change over that same period of time. Some mortgage programs also have a bi-weekly payment option where you’ll pay your mortgage every two weeks. Assuming your monthly mortgage was $2000 per month, this is broken down to about $1000 every two weeks which is nice because it has two benefits, one benefit is that it matches some pay structures, i.e. many companies in the US typically pay your salary every 2 weeks. Of course this also means that instead of 12 payments of $2000 or $24,000 per year, you’ll pay $1,000 every other week which would be 26 payments (52 weeks per year / 2 (every other week)). The total amount of funds that would then contribute to your loan amount would be $26,000 which would pay down your loan more this way or reduce your overall payment amount. Consult your loan officer for details on the bi-weekly payment plan.

The other benefit to a fixed rate mortgage is that at the end of the loan, you don’t have a balloon payment or the need to come up with any other money that you haven’t already been paying. Some mortgage products have a balloon payment that would require you to come up with additional funds at the end of the term or cause you to refinance the balance in order to keep your home.

With a fixed rate mortgage, a percentage of your payments each month will go towards the interest and the rest will go towards the principal. This is not an even amount. What I mean is that the the first few years of your mortgage, the majority of the monthly payment goes to pay the interest and the smaller percentage goes towards the principal. Of course you can make extra payments on the principal which means the interest payment will decrease simply because the interest paid is done so on the balance, which if you pay more towards the principal above and beyond the monthly payment, there will be a lower balance due and less interest. This doesn’t mean your monthly payment will change, but it will decrease the amount of interest due and increase the percentage of your payment that is applied to paying down the principal.

This conservative mortgage program is possibly the easiest to understand of the mortgage products that are available. The key to success with this style or any other style of mortgage is to find a loan officer that you can trust who will guide you through the process of pricing loans, understanding the terms of a loan, whether a fixed rate, variable, interest-only, or other loan, and basically someone you can work with who can become familiar with your situation and provide appropriate advice for what your home ownership goals and objectives are. A good loan officer will typically be familiar with other loan products that will work for you as well.

Brian Armstrong is a licensed loan officer in the state of Utah. He actively promotes information about Utah mortgage rates on his website. You can also find some detailed information about the services and types of home loans Brian offers from his website about mortgages in Salt Lake City.