Maryland 30 Year Mortgage Loan Learning Centre
A large majority of homebuyers choose a 30-year fixed rate mortgage when taking out a loan to buy a home, but it may not be the best choice for all households. There are many reasons why home buyers flock to the 30-year fixed rate mortgage: flexibility, affordability, and stability. The longer loan term means the principal is paid back over a longer time period of 360 months.
Monthly payments are lower than on a 15-year mortgage, which is needed to make buying a home more affordable for first-time buyers. Even though the 15-year fixed-rate mortgage was just 3.5 percent last year, the lowest in recorded history, and three-quarters of a percentage point below the 30-year fixed-rate loan, more than 85 percent of the home loan market was financed by 30-year fixed-rate mortgages.
The 30-year fixed-rate mortgage has been popular particularly in recent times after the housing bubble and crash. New home buyers want certainty, and by getting a 30-year fixed rate mortgage while they are in their homes is protection against the uncertainty of other economic factors. Another benefit of a 30 year mortgage is stability, a fixed interest rate over 30 years also means a monthly principal and interest payment that is predictable for homeowners. 30-year fixed-rate loans are flexible because it is generally prepayable at any time without penalty.
If homebuyers choose to pay off the loan before maturity, in the case of refinancing or selling the home, for example, they can do so without paying an early pre-payment fee. (*Maryland does not allow any financing with pre-payment penalties.) This feature is largely unique to the U.S. as most other nations generally require prepayment penalties for long-term fixed-rate mortgages on single-family homes.
The 30-year fixed-rate mortgage is particularly popular with first-time homebuyers and younger borrowers. Some people would prefer to go with a shorter term to plan to avoid paying mortgage payments during their retirement years.