30 year Fixed Rate Mortgages:
30 year mortgages were once the only type of mortgage possible. There are currently many different options and mortgage types but 30-year fixed still remains the most popular. A 30-year mortgage is when the borrower has 30 years to pay back the mortgage at a fixed interest rate, which means the payments remain the same for the course of the mortgage. The initial rate and mortgage payments are higher in a 30 year fixed, in comparison to other mortgages, such as an adjustable rate mortgage, yet payments remain the same regardless of interest rate changes. The payments on fixed rate mortgages are calculated in order to have the mortgage paid in full by the end of the term, which in this case is 30 years. As the loan is paid down, monthly payments become more towards the principal and less towards the interest.
15 Year Fixed Rate Mortgages:
15 year fixed rate mortgages are popular with people who can afford to pay 10 to 15 percent more higher monthly payments than the traditional 30 year. The advantages to this loan is that it allows the homeowner to have their mortgage paid off before their children begin college or before retirement. Qualification for this type of loan is sometimes more difficult to meet than the traditional loan because the income requirements are higher.
Balloon Loans:
Unlike 15 and 30 year fixed rate loans, balloon loans do not pay off the entire balance by the end of the term. Balloon loans have a fixed rate and fixed monthly payments by at the end of the term there is a lump sum due. This allows lower monthly payments, yet requires a large amount due at the end of the term which can come from either a personal savings or a refinance.
