If you are thinking about purchasing a home or refinancing, you may be looking at a 30-year fixed mortgage plan. But are you sure it’s the best option for you? Learning the pros and cons of the 30-year fixed mortgage plan is essential in making the best choice for your mortgage.
What is a 30-Year Fixed Mortgage Plan?
A 30-year fixed mortgage plan is a home loan that is repaid over 30 years with a fixed interest rate throughout the life of the loan. Because the repayment terms are spread out over a longer period of time, there are many benefits to choosing a 30-year fixed mortgage plan, but there are many other aspects to consider as well.
Pros of the 30-Year Fixed Mortgage Plan
The main pros of the 30-year fixed mortgage plan are that you have lower payments and can afford ‘more house’. Because you have such a long time to repay the loan, you are more likely to qualify for your desired home mortgage amount. You also have a reliable, fixed monthly payment for the life of the loan, so you’ll always be able to budget accordingly. You can always pay more than what’s required to pay off the loan more quickly, but having a lower monthly payment can help when finances are tight.
Cons of the 30-Year Fixed Mortgage Plan
The main con of a 30-year fixed mortgage plan is the amount of interest you pay over the life of the loan. Interest rates tend to be higher on a 30-year fixed mortgage plan, because the risk is spread out over a longer period of time. When this higher rate is compounded over 30 years, you spend a lot of money on interest. Plus, you’ll be paying off interest first, so it will take a while to start building equity in your home; when you do, it may not happen as quickly as you’d like. There is also a danger in overborrowing with a 30-year fixed mortgage plan as well; low monthly payments may lure you into a false sense of security. Don’t purchase a more expensive home than you’d planned without considering increased property taxes, maintenance, and insurance costs.
Are you looking for a mortgage or in need of help managing your mortgage process? Contact us today and let us help you make the best decision regarding your mortgage plan.