Types of Home Mortgages: Traditional 30-Year Home Mortgage
Introduction and Overview
The traditional 30-year home mortgage is still the most
common type of mortgage on the market today. Otherwise known
as a fixed-rate mortgage, or FRM, this is a loan designed
for people who intend to stay in their homes for at least
ten years, and would like the peace of knowing their rates
will stay stable.
Who a Traditional Mortgage is Right for in this Day and
Age
This loan is for anyone who has a stable income and good
credit. Your payment will never increase, although your
payments will depend on your particular financial situation
and loan amount. The traditional 30-year home mortgage always
offers a consistent interest rate with consistent payments,
with slight changes due to property taxes and insurance.
The Early Period of the Traditional Mortgage
In the initial months of a traditional 30-year home loan,
payments will be mostly interest. This is because the annual
rate is divided out monthly. So if you have a rate of 9%,
this means your monthly rate is .0075. On a loan of $50,000,
this makes your first interest payment $375. If your monthly
payments are $400, you have paid $25 against the principal.
This doesn’t sound like much until you realize this
happens every month, so your second month you will pay interest
not on $50,000, but on $49,975. Once you have made consistent
payments for 22.5 years your payments are equal in principal
and interest paid.
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