The 30 Year Fixed Rate Mortgage – Still Your Best Option?


During my years as a real estate broker and mortgage lender representative, the 30 year fixed rate mortgage was the best option for most first time home buyers, and in many cases, home owners who were refinancing. This was true for a number of reasons, most important of which, was the lower monthly payments based on a longer term. The 30 year fixed rate mortgage was, at that time, the most popular FHA-insured mortgage type and FHA mortgages were the mortgage of choice in most markets where I did business.

However, the 30 year fixed rate mortgage was also the first choice of most conventional borrowers for some of the same reasons. The total payments were spread over a longer period of time with the interest rate set for the entire term of the mortgage. That having been said, is the 30 year mortgage still an industry standard, and does it meet the specific needs of today’s mortgage borrower? Since your financing needs are, in many cases, very unique you may wish to choose a different mortgage type.

There have been many changes in the real estate and mortgage market over the last 4 years – brought on primarily by the subprime mortgage meltdown – but even if the 30 year home loan is still an industry standard, is it the right choice for you? The answer to this question will depend on a couple of factors. If, for example, you intend to sell your home within a 5 to 7 year period it may be best to take advantage of the lower rate 5 or 7 year ARM (Adjustable Rate Mortgage) because since the total payments on a 30 year mortgage are spread over a longer period of time and the interest rate set for the entire time of the mortgage, the interest rate carried on it is higher than that on an ARM.

As we mentioned, the plus side for a 30 year home loan is lower monthly payments. This attraction is somewhat dimmed by the fact that you pay $1000s extra in interest; But, your interest is 100% tax deductible (unless the US Congress changes this feature as they may be contemplating) which does lower your after-tax cost.

It offers you some flexibility so that if your financial situation changes and you have more money you can pay it off in less than 30 years, this while keeping the low monthly payments. Your payments are smaller so, in reality, you can purchase a larger roomier home. To show an example of the interest difference between 30 year home loan rates and one of the other mortgage types.

On a 30 year, 250,000 dollar loan using 4.5% interest rate your monthly payment of interest and principle would be $1,266.71; But over the next 30 years you will have paid approximately $337,500 in interest alone. Now with a 15 year home loan rate on the same amount, but a lower 15 year rate of 3.5%, you will pay $1,787.21 (principal & interest) per month and over the next 15 term, you would pay $131,250 in interest which would save you approximately $206,250 dollars.

Those numbers suggest that, if you have the will power to invest the savings gained from the lower (30 year mortgage) monthly payments, it still could be a good choice to go with the 30 year mortgage. Especially if you can find an investment that the long term payoff matches or exceeds what you would save in a 15 year mortgage. Another factor to consider is how fast you want to accrue equity in your home or to own it outright. 30 year mortgage loans take much longer for you to build equity.

The 30 mortgage is certainly attractive, and the vast majority of home buyers opted for 30-year loans based on everything that was already said; And although there have been discussion about a 35 or 40 year mortgage, and some lenders have adopted these longer term mortgages, they were never as popular as the 30 year mortgage.

However, there are still many other mortgage financing options to consider, and probably the biggest question you have to ask yourself when considering a mortgage loan is what are your financial goals? What loan plan will help you the most to reach that goal? It is clearly to your advantage to look into other home financing options for the best mortgage available for you and will best accomplish your financial goals. It may surprise you that, because of your personal situation, other plans may be more suitable for you.


First Home Purchases – Pro FHA Continuation

While many predicted the collapse of the real estate market, others were taken by surprise when the market that had created so much opportunity for profit prior to the crash, began to crumble. Certainly, one of the leading events that eventually resulted in the collapse of the real estate market was the crash of the subprime loans market. As a result an unfathomable amount of mortgage companies were suddenly forced to close their doors. Even those companies that were not forced out of business found they had suddenly lost billions of dollars. Read more at First Home Purchases – Pro FHA Continuation

Where is the economy headed? What’s the outlook for real estate & mortgages? Gold? US/China relations? Get interpretive answers from this In-depth and Insightful Interview by Max Kiezer of the Edge who recently chatted with Edward Harrison (Seeking Alpha) and creator of the Credit Writedown Blog (www.creditwritedown.com) was Interviewed: See it here!

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A message to Prime Mortgages readers:

Thank you for your support. We will continue working to provide the most relevant and useful information about current FHA-insured programs and related topics. Please provide any comments, opinions or preferences which you would like us to be aware of. Thanks and God Bless!

Javeton

For more about 203k, please visit the HUD website

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If the government can’t run business, how come businesses always run to the government for a bailout when it runs into trouble?FHA-insured mortgages, government run for 75 years. Lest we forget?

Property Inspections: Are They Necessary?


One question that has been commonly asked by prospective purchasers of real estate property, especially those would-be purchasers that will apply for FHA financing, is whether or not a real estate inspection is really necessary. The long and short answer to that question is, absolutely! I will make my best effort to explain exactly why this is so.

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First of all, we should understand clearly what a real estate property inspection is: The act of having a qualified (and in many states, licensed) professional take a look throughout the property you are considering buying and informing you of obvious and potential damage or problems with the property. This is not something you want your uncle Bob doing, unless of course, good old uncle Bob has had the training and experience to know what to look for to satisfy an inspection report and the knowledge to anticipate potential property breakdowns.

The smart home buyer knows that even though the property must be evaluated by a hud-approved (FHA) appraiser, this will not be enough to insure that the property will be free of deficiencies or potential breakdowns of major working components because although the appraisal must be done in accordance with HUD’s “Minimum Property Standards”, the appraiser’s primary responsibility is to determine value and not structural integrity of the property or its working components.

Many who are planning to purchase properties and obtain mortgage financing through the FHA comes with the attitude that they know there are problems with the property, but the price is very attractive and by the time it is appraised those problems will be dealt with and that is why they are purchasing the property. The problem is that the untrained eyes may miss some problems that should be addressed before moving along to other problems. The problems they are aware of may not be what ultimately causes the foundation to crumble.

For instance, if there were obvious signs of plumbing problems that could result in a leak behind the wall, you wouldn’t want to paint that wall or replace the floors until you had the possible leak checked and either confirmed or denied and repaired if necessary. Otherwise you would likely need to undo the work (wasting both time and money) that had already been done by the time you found out about the leak that a competent property inspector would have told you about before you even began working on the property.

The smart home buyer knows that property inspection reports and professional engineer reports reflect all elements of a real estate property (foundation, roofing, heating, plumbing and electricity, to name a few that are readily recognizable to us), the condition of those elements today, the life span (projected time to continue working) and whether replacement or repair will remedy the inevitable breakdown. The smart home buyer places great importance on the property inspection report in his/her purchasing decision.

Inspections are great before making an offer on a house because they actually give home buyers a bargaining chip. For the serious home buyer this is a fact that simply cannot be ignored as it directly affects the bottom line price. If the roof needs to be replaced you are justified in making a lower offer. If the electrical system needs to be updated, this is something that should be adjusted or amended in the final offer. These are also things that are easily identified by a qualified and competent property inspector. Anything that can save time and money is great when investing in property and an inspection can do both.

Another great purpose about a good property inspection is that it often sheds light on the amount of money that will be needed in order to get the house in good working condition. Knowledge is very important when purchasing a home. It can mean the difference between taking on an unknown expense or walking away if it would be too great to deal with once title and responsibility has been transferred. A purchaser should never take on a property that is pretty much guaranteed to blow a hole in the home management and mortgage repayment budget and probably the only way to avoid this is to know about it ahead of time with a property inspection report.

The smart home buyer knows that a proper home inspection can inform you of potentially hazardous conditions within the home that may not be readily apparent to the untrained eye. Some of these things include toxic mold, which can be financially disastrous as well as hazardous to your health; foundation issues, and structural damage that is threatening the integrity of the property, among many others as mentioned earlier.


An inspector should also notice the structural integrity of homes that could affect your home if they are weakened or fail all together. While these things seem so simple, it is often the simple things that lead to the greatest disasters. Whether or not you realize it, a good home inspector is one of the best tools you can have in your arsenal when it comes to purchasing real estate.

A message to REAMS readers:

Your support is very much appreciated. We will continue working to provide the most relevant and useful information about current FHA-insured programs and related topics. Please provide any comments, opinions or preferences which you would like us to be aware of. Thanks and God Bless!

Javeton

For more about 203k, visit the HUD website; and to find out if you qualify for 203k financing, visit a HUD-approved lender at www.unitednorthern.com/.

humor

If the government can’t run business, how come businesses always run to the government for a bailout when it runs into trouble? FHA-insured mortgages, government run for 75 years. Lest we forget?

As of July 1, 2009 a recent housing initiative was expanded to allow Las Vegas borrowers who are up to 125% underwater on their mortgages to seek mortgage refinancing. Thanks to the Making Home Affordable program!