Since the Federal Housing Administration first accepted 30-year fixed-rate mortgages in 1954, this loan option has remained a staple for homebuyers throughout the country. While it has proven to be an affordable mortgage for most, as monthly payments remain low over a longer period of time, it has not proven to be the best option for all. So is a 30-year fixed-rate mortgage right for you? Here are the questions you should ask yourself:
- Do you plan on moving again soon? If you intend to move again within the next couple of years, then a 30-year fixed-rate is not the mortgage for you. This option is meant for homebuyers who plan on staying in one place for more than a few years. Typically, three to five years (depending on the mortgage expert you ask) is the amount of time it will take to recover the amount you spent on the property.
- Will you be comfortable with your monthly payment plan? Once you lock in your rate, your monthly payments will remain the same throughout the entirety of your mortgage—that is, of course, unless you refinance to a new rate later on. Although this is widely recognized as the most affordable mortgage option, this may not be the best financial decision for you. Consult with your lender for more information.
- Do you need to build equity fast? Since a 30-year mortgage means payments over a longer period of time, you are going to build equity slower than you would on a 15-year mortgage. If you don’t plan on using your new asset as money for buying a new home or financing future endeavors, then this type of mortgage could be a great option for you. To calculate how much equity you’ve built, simply subtract your loan balance from the value of your home.
- Would you like peace of mind that your interest rates won’t fluctuate? If you’re the type of person who gets anxious with change, then the 30-year fixed-rate is a great option for you. With this type of mortgage, you know your exact payments and can plan accordingly.
Although answering these questions should give you a better idea of whether or not a 30-year fixed-rate mortgage is right for you, make sure to discuss your options in detail with a local lender. This will ensure that you lock in a mortgage that’s perfect for your home financing needs. For more information about mortgage options, or to learn more about home financing, contact one of our mortgage specialists today.