The 30 Year Fixed loan program is the most common program chosen by homeowners. It provides fixed, secure payments at the same interest rate and mortgage payment for the life of the loan (30 years). But there are other options for fixed rate term mortgages that not everyone may be aware of. Besides the 30 Year Fixed program, you also have the following fixed rate term options:
- 10 Year Fixed
- 15 Year Fixed
- 20 Year Fixed
- 25 Year Fixed
Not all of these come with an interest rate improvement though. For instance, the 25 Year Fixed rate is the same as the 30 Year Fixed, but it is a forced payment and payoff period of 25 years, instead of 30. So even though you could select the 30 Year Fixed loan and put yourself on a personal schedule to pay off the loan in 25 years, some people know that they will not be this disciplined and require the terms of the Promissory Note to dictate that payment and payoff period. The most common option, and most dramatic change in interest rate, is between the 30 Year Fixed and the 15 Year Fixed terms. The 15 Year Fixed rate is nearly a full percentage point lower than the 30 Year Fixed; however, not many homeowners can afford the payment. Obviously, you have less time to pay the loan off, so the payment is much higher. Choosing which program can depend on many factors: – What do you qualify for? – What are you comfortable paying on a monthly basis? – Where do you see yourself at the end of the loan’s term? – Is your goal to pay off the loan as soon as possible? – Is your goal to take advantage of as much of a tax deduction you can get? So you can see the difference in rates and payments, here are current interest rates. Quote assumes a $400,000 loan amount, 75% Loan-to-Value ratio, middle FICO score of 740 or greater, and a 30-day lock period.
- 30 Year Fixed: 4.25% (APR 4.29%). Mortgage Payment: $1967.76
- 25 Year Fixed: 4.25% (APR 4.30%). Mortgage Payment: $2166.95
- 20 Year Fixed: 4.125% (APR 4.125%). Mortgage Payment: $2450.35
- 15 Year Fixed: 3.375% (APR 3.46%). Mortgage Payment: $2835.04
- 10 Year Fixed: 3.25% (APR 3.36%). Mortgage Payment: $3908.76
