30 Year Fixed Rate mortgages are a "classic" mortgage option. While many people think of them as "traditional", when the 30 year fixed rate, fully amortizing principal & interest mortgage was introduced during President Roosevelts administration following the Great Depression, this was a revolutionary financial product which directly resulted in the housing boom we homeowners of America have been enjoying for over 60 years.
Today, the "old fashioned" 30 year fixed rate mortgage is an increasingly attractive option for borrowers who are wisely seeking the security of fixed rates. Interest rates on 30 year fixed rate mortgages havent been this close to traditionally cheaper ARM adjustable rate loans in years, making the argument for borrowers considering refinancing their existing adjustable rate mortgage all the more simple: "A 30 year fixed rate mortgage can actually be cheaper than an ARM mortgage, so why wouldnt I want one?"
30 year fixed rate mortgages are for borrowers that plan on keeping a home longer than 5 years. The interest rates will not fluctuate as they do with ARM loans. Rate increases and high default rate on ARM loans is pushing more borrowers to request a fixed rate mortgage.
30 year Fixed rate mortgages are characterized by their interest rate (including compounding frequency, amount of loan, and term of the mortgage). With these three values, the calculation of the monthly payment can then be done.
Another popular version of the standard 30 year fixed rate loan is an introductory interest only period. One such program is a 40 year loan with an introductory 10 year interest only period followed by the typical 30 year fixed rate mortgage. This loan program give the homeowner lower payments for 10 years but also provides the security of have a fixed rate with no surprises.
30 year fixed rates were considered too expensive by many borrowers, especially when adjustable rates on ARM mortgages were exceptionally low over the past several years. With that argument holding less weight than it used to, more borrowers are considering 30 year fixed rate mortgages than ever before.
Borrowers who stand to benefit most from the resurgence of the 30 year fixed rate mortgage are those who are approaching the end of the introductory fixed rate period of their ARM adjustable rate mortgages.
ARM mortgages have a "teaser" or "start rate" period during which the borrower's payments are artificially low. When that period expires, the rate on their mortgage can increase by as much as 3% or more, and with today's rising adjustable interest rates this can mean that their payments can more than double literally overnight.
Refinancing an expiring Adjustable Rate Mortgage is expected to be the number one reason for borrowers to refinance in 2007 & 2008, and for good reason. With the availability of affordable 30 year fixed rate mortgages, the risk of riding out an ARM 's potentially volatile rate increases is too high for most borrowers to safely accommodate.
For more information on how refinancing into a 30 year fixed rate mortgage can help you add stability to your housing expenses, and potentially even help you lower your total monthly expenses, feel free to contact us at 415-617-5448 today.
If you are currently in an Option ARM or Cash Flow style mortgage which allows you to defer interest in exchange for home equity by making a low minimum payment, you may think that a 30 year fixed rate mortgage would literally break the bank. You may be surprised to know that you can actually significantly reduce your interest rate while maintaining the flexibility of the Cash Flow & Interest Only payment options, and still have a 30 Year Fixed Rate. This new program is available to all borrowers with a good history of making their mortgage payments with as little as 20% of equity in their homes, so chances are that you qualify. For more information about 30 year fixed rate mortgages with Cash Flow options can help you preserve the flexibility of your pay option mortgage while adding the security of a low fixed rate for 30 years, feel free to contact us at 415-617-5448 or via email at [email protected]
A very popular alternative to the 30 year fixed over the past several years has been the 3 Year ARM Adjustable Rate Interest Only Mortgage (often called 3/1 or 3/6 LIBOR). 30 year fixed rate mortgages are now available with Interest Only payments available for 5, 10, 15 or even 20 years, often at equal and sometimes even lower payments than the equivalent 3 Year ARM, 5 Year ARM, or 7 Year ARM Adjustable Rate mortgage. Interest only payments no longer automatically mean adjustable rates. For more information on 30 year fixed rate Interest Only mortgages, give us a call at 415-617-5448 and we'll help you get answers to your questions. Think of it as having your cake and eating to!