A 30-year fixed rate mortgage is a home loan that has a consistent rate over a 30-year term. This type of mortgage is perhaps the most common one for new and seasoned homeowners alike. The reason? Because the loan lasts for 30 years, your monthly payments tend to be lower than they would be with a shorter mortgage, like a 15-year FRM. And because you get to lock in your interest rate, you know exactly what to expect with your bills each month.
Though this is an immensely popular loan product, it may not be right for everyone. Read on to learn more about the 30-year fixed rate mortgage.
Is a 30-Year Fixed Rate Mortgage (FRM) Right for Me?
There are no hard and fast rules to determining if a 30-year FRM is right for you. However, most people who opt for this home loan meet some or all of the following criteria:
- You like to budget carefully.
- You like the idea of having a reliable, consistent, monthly home loan payment over a long period of time.
- You plan to stay in your home for at least a few years.
- You can afford a large down payment
- You have a reliable source of income
While these are very popular mortgages, one of the downsides to a 30-year FRM is that your first decade of payments does not contribute very much to your home equity. Unless you’re able to make a substantial down payment on your home, with this type of mortgage you’ll be (in effect) renting your home from the bank. To avoid this situation, you may be better off opting for a 15-year FRM or saving up to make a larger down payment before buying a home.
The Interest Rate on a 30-Year FRM
So, what’s the interest rate on a 30-year fixed rate mortgage? The interest rate fluctuates with the LIBOR index. As of 2018, the interest rate for a 30-year FRM falls somewhere between four and five percent.
When you obtain your 30-year fixed rate mortgage, your rate will remain the same for the duration of your loan. If you were to close on a house today, for example, you would lock in an interest rate of 4.64%. While this rate will most likely go up over the following months, you will pay a steady amount that’s figured in to your mortgage.