30-year FRM: 30-Year Fixed Rate Mortgages Explained

What’s it mean to have a 30-year mortgage? Simply put, your loan rate, plus the principal and interest payments, are secured for 30 full years. Because your loan amortizes, it will be paid in full on that last payment in year 30. You’ll never have to pay another cent to the mortgage company after that. Your insurance, homeowners’ association fees, and taxes may continue to slowly climb, but those are the only expenses you’ll have to worry about if you never refinance or take out a second mortgage.

What is a 40-Year Mortgage?

If you’ve been house hunting before, or even paying attention to some of the commercials for mortgage products, you’ve no doubt seen tons of references to the 30 year mortgage. This is the gold standard and default mortgage for most of the industry, but it’s not the only loan out there. In fact, it’s not even the longest term mortgage available.

There’s another loan that no one really talks about these days: the 40 year mortgage.

What is a 30-Year Mortgage?

The 30-year mortgage, the steak and potatoes of the home lending world, is the most common type of mortgage you’ll run into as a home buyer. It’s so common that the Consumer Expenditure Survey provided by the Bureau of Labor Statistics determined that between 2004 and 2014, 61.49 percent of all mortgages were 30 year fixed rate mortgages. The second most common type, 15 year fixed rates, only made up 14.64 percent of the market.

The Different Types of Mortgages

There are many different mortgage options for homebuyers to choose from. For starters, mortgages are usually categorized as either a fixed rate or adjustable rate. Then there are various loan programs to choose from including FHA Loans, VA Loans, USDA Loans, or Conventional Loans

How to Calculate a Fixed Mortgage Rate

Calculating a fixed mortgage rate is relatively simple: You take the annual figure and turn it into a monthly figure. To calculate the monthly fixed mortgage rate, just do the following steps:

change the annual rate to a decimal number by dividing it by 100;
take the resulting decimal figure and further divide it by 12; and
voila!, You have the monthly fixed mortgage rate.

Home Loans for First-Time Home Buyers

Buying your first home is a challenging but important first step in securing your future. There are many financial products available on the market for first-time homebuyers. Each product has its target market, so it’s important to understand your needs so as to match them to the products on offer.

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