A 30-year fixed-rate mortgage is a fixed mortgage that allows the borrower to issue a fixed amount every month for 30-years to pay off the loan. The typical rate of interest for a 30-year fixed loan is 3.78 % according to the Fannie Mae and Freddie Mac terms. However, this set rate could vary a tad among the different lenders, and these depend on several factors. For instance, your credit score is one of the important deciders to the interest rate you will be given for the loan. If your credit score is 680 and above, then you could get favorable rates and loan terms. The opposite is true for borrowers with credit scores below 630, who can end up being charged up to 5.1%.
Fixed-rate mortgages are generally more appealing because they allow people to lock in for a low rate monthly and for a long time. Historically, however, the rates were much higher for the 30-year mortgages than they are now. In the year 2000, for instance, the rates soared as high as 8.64%. When the Federal Reserve increases the charges to financial institutions such as banks, one could expect that the tariffs would also go up, and this is the case with adjustable-rate mortgages or ARMs but not so with fixed-rate mortgages. After the 2008 crash, popularity increased significantly for fixed-rate mortgages, which were considered much safer compared to the adjustable-rate loans.
The Arizona 30 year fixed rate loans provide reliability in their payments because the rate remains the same over the life of the loan permitting one to budget efficiently. The mortgage is also charged at a low-interest rate bearing in mind the long term of payment. The lower amount of payment monthly permits borrowers to have some disposable income to use for expenditure and a cushion for emergencies that may arise during the loan term. It also permits the financial able individuals to refinance to a 15-year mortgage loan should the need arise to finish the payment within a shorter period.
The loan is applied over an extended term, imposing a higher risk to the lenders because there is a greater probability that the loan may not be finalized. For this reason, the interest of the 30-year loan tends to be much higher than other fixed-rate mortgages. The interest is not only higher but also accumulates for twice the time if comparing it to the 15-year fixed mortgage. Likewise, the longer the debt, the more it will hinder financial freedom.
For more information about 30-year fixed-rate mortgages in Arizona, contact our qualified mortgage experts today.