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Home Loans -- The Hot New Product? The 30-year Mortgage
By: Charles Essmeier
In recent years, the mortgage industry has introduced dozens of new types of
loans. The needs of every borrower are different, so the mortgage companies have
tried to come up with an answer for every problem. They’ve introduced 40-year
mortgages, promoted 15-year mortgages, and introduced the wildest array of
variable-rate mortgages imaginable. There are mortgages that have interest rates
that adjust every few months, every few years, or just once. A recently popular
product that thrives on the East and West coasts is the interest-only mortgage,
which reduces payments by not requiring payment on the loan’s principal for the
first few years of the loan. The prospective homebuyer could have as many as one
hundred possible types of loans to choose from when searching for a mortgage.
Amidst this huge array of loan types, one type is growing in popularity faster
than all the rest, and it may surprise you. The fastest-growing type of mortgage
in America right now is the traditional 30-year, fixed-rate loan. Last year,
only about 35% of all borrowers took out a 30 year, fixed-rate loan, but so far
this year, the rate has increased to nearly 50%.
This may seem odd, as most everyone has been opting for adjustable-rate
mortgages for the last few years. Adjustable rate mortgages tend to offer lower
interest rates, and lower interest rates mean lower payments. These loans have
been popular with buyers who move often, have lower incomes or buyers who simply
want to invest their money elsewhere. So why is the 30-year fixed-rate mortgage
back in style? Because interest rates have dropped to their lowest point in
fourteen months, and they are nearly as low as they were in the summer of 2003,
when they reached the lowest point on record. In short, the 30-year fixed-rate
mortgage is not only seen as competitive with other types of loans, but it is
actually seen as safer. Borrowers who have adjustable-rate mortgages enjoy their
biggest advantage when rates are high, knowing that their interest rate is lower
than a fixed-rate mortgage. But when interest rates for the market as a whole
reach historic lows, the borrower with an adjustable-rate mortgage knows that
their rate can only go up. At times like the present, when rates are only likely
to go up, converting an adjustable rate loan to a fixed-rate loan is a smart
move. First-time buyers can safely take on a 30-year fixed-rate loan and be
comfortable in the fact that their rate will stay fairly low for the duration of
their loan.
Sometimes, the way things have always been done turns out to be the best. While
there are still some buyers who will benefit from adjustable-rate loans, most
borrowers would do well to lock in their loan at a fixed rate now. Historically,
fixed-rate mortgages have rarely been under six percent, so obtaining such a
loan while they are available is one of the smartest moves a homeowner can make.
About the Author:
©Copyright 2005 by Retro Marketing. Charles Essmeier is the owner of Retro Marketing, a firm devoted to informational Websites, including http://www.End-Your-Debt.com, a Website devoted to debt consolidation
information and http://www.HomeEquityHelp.net, a site devoted to information on
home equity loans. |
