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30-Year Fixed Rate Mortgage
30-Year Fixed Rate Mortgage
A 30-year fixed rate mortgage is just as its name states, a mortgage with a term of 30 years that has a fixed interest rate. This is the most common type of mortgage and, for a while, was the only type of mortgage available. The life of a 30-year Fixed Rate Mortgage begins as a payment consisting mostly of interest. Over time the percentage of each monthly payment becomes less interest and more principal.
In comparison to a 15-year Fixed Rate Mortgage a 30-year mortgage will accrue significantly more interest (roughly 50% more). This is due to the fact that 15-year Fixed Rate Mortgages tend to receive a rate reduction of .5%-1% and are matured in half the time. The plus side to a 30-year mortgage is a lower monthly payment than a 15-year mortgage.
A 30-year Fixed Rate Mortgage will also accrue slightly more interest, over time, than an Adjustable Rate Mortgage. This is due to the fact that the lender is absorbing the risk of interest rate fluctuations so, in turn, must be rewarded for the added risk. Of all mortgage options the 30-year Fixed Rate Mortgage is the most conventional and, probably, one of the least risk intensive mortgages available.