The Upside Of The 30-Year Fixed-Rate Mortgage

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April 10, 2017

Even as rates change, buyers desire the affordability, flexibility, and stability that a 30-year fixed-rate loan offers.

Freddie Mac says that last year, 90 percent of homebuyers opted for 30-year fixed-rate mortgages instead of 15-year fixed-rate loans, adjustable-rate mortgages, or loans with other terms.

The 30-year loans have the same payments every month (unlike ARMs, for instance, which may fluctuate wildly), and buyers can pay off their loans early without a penalty fee.

The main advantage is how affordable the loans can be, as buyers have 30 years to pay back the balance of the home.

The longer term means the principal is paid back (that is, "amortized') over a longer time period. That means the monthly payments are lower than on a 15-year fixed-rate mortgage, which is fundamental to making homeownership viable for first-time buyers in their early earning years.

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