Consider The Interest Only 30 Year Fixed Rate Loan

Category: Finance, Mortgages.

Are you looking to buy a home?

The astounding number of foreclosures across the country has forced the government to find ways to stimulate the economy. You are actually at a great advantage now, despite all the horror stories on the news every night. One of the major benefits for buyers in the market today is the low 30- year fixed rate. The average fixed mortgage loan rate in the final weeks of January 2008 was 48% , marginally above 2004 s low of 40% . Recently, 30- year fixed rates dropped to the lowest level in the last four years. This marks the third consecutive week that 30- year fixed rates were below six percent. This has been one of the main factors in the drop, along with a further weakening of the economy.

In a battle to combat a recession, the Federal Reserve implemented key interest rate cuts. It is hoped such a large drop in rates will spur more people to buy homes, whether new or existing. With so many in foreclosure peril from adjustable rate mortgage loans, homeowners are looking to save money and lower payments. For current homeowners looking to refinance, the current low 30- year fixed rate is the perfect opportunity. The advantages of a 30- year fixed rate are obvious. When adjustable rates balloon, as they have recently, the fixed rate will remain the same. While the payments initially may be more than an adjustable rate mortgage, the fixed nature of the mortgage will keep payments steady.

Also, the early payments of a 30- year fixed rate loan are primarily interest, which is tax deductible. One of the cons of a 30- year fixed rate is higher interest. Monthly financial planning is easier when you know what each payment will be. With a 15- year mortgage, payments are much higher but interest is significantly lower. This adds a small amount onto each payment until a percentage of the principle has been paid, usually twenty percent. Also, without a down payment, mortgage insurance is usually required. After this the private mortgage insurance( PMI) is no longer required.

Otherwise they may continue to charge you for it. If you have PMI in your mortgage payments, be sure to notify the lending institution when you have paid off that percentage of your property. Though there are some slight drawbacks associated with a 30- year fixed rate mortgage, they are generally a homeowner s best bet. Especially with the current economic uncertainty, a 30- year fixed rate is a reliable constant. Some studies have shown homeowners saving money on adjustable rate mortgages, but these are rare cases. Lending institutions have varying interest offers.

A good site has no direct connection or interests attached to any of these companies. Many Websites report on the current rates offered by large lenders. Be mindful of any sites that offer advertising for any financial institutions. Consider the interest only 30 year fixed rate loan. Want to make this loan slightly more advantageous? With this product, you can make interest only payments for the first ten years.

Financing a home in this manner will expand your purchasing power by an extra 20% with the same mortgage payment as a straight 30 year amortizing loan. After the first ten years, the loan amortizes out over the remaining 20 years. With smart shopping, it s a great time to find a home with the current 30- year fixed mortgage rates. So take advantage of this time to buy your dream home or refinance your existing property. The housing situation will recover, and the rates will go up.

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