When you begin looking into mortgage loans, chances are good you’ll consider a 30-year mortgage. A 30-year fixed-rate mortgage is the most popular type of mortgage in the country—especially among first-time homebuyers.
Thirty-year mortgages charge more in interest than shorter loans, both because you pay interest over a longer term and because interest rates are higher. But choosing a 30-year home loan could make buying real estate possible by reducing the amount you have to pay each month.
This guide will review your options and help you determine if you can qualify for a good rate on a 30-year mortgage loan.
In this guide:
- Average 30-Year Fixed-Rate Mortgage
- Compare 30-Year Mortgage Rates
- Mortgage Rates Over Time
- What is a 30-Year Fixed-Rate Mortgage?
- Does a 30-Year Mortgage Make Sense For Me?
- 30-Year Mortgage Refinance vs 15-Year Mortgage Refinance
- Where Can I Find the best 30-Year Mortgage Rates
Average 30-Year Fixed-Rate Mortgage
It can be helpful to know the average mortgage rates so you can compare them with the loan terms you’re offered by lenders.
|Average 30-Year Mortgage Rate||As of|
Sources: Freddie Mac and the Federal Reserve Bank of St. Louis.
Compare 30-Year Mortgage Rates
|Company||Fixed APR (8/20/19)|
|Navy Federal Credit Union||3.506%|
|New American Funding||3.381%|
|Bank of America||3.577%|
|PenFed Credit Union||3.601%|
|Alliant Credit Union||3.364%|
Note: Some of the above rates are estimates based on location, loan amount, credit score, and more. Your actual rate will vary based on your financial situation.
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Mortgage Rates Over Time
Mortgage rates change over time depending on prevailing interest rates and other economic conditions. Here’s how mortgage rates have changed over time.
What is a 30-Year Fixed-Rate Mortgage?
A 30-year fixed-rate mortgage is a secured loan you can use to buy a home. Its payments are amortized over 30-years, meaning each fixed monthly payment covers a set amount of principal and interest.
The payments are set based on how much you need to pay to have the loan fully paid off when the 30-year term ends. You can get a 30-year mortgage from both an online mortgage lender or local banks and credit unions. Mortgage brokers can also help you get a loan.
A 30-year mortgage rates will be different from 15-year mortgage rates or 10-year mortgage rates. Since the repayment timeline on a 30-year loan is much longer, rates are usually higher. But since your total debt is spread over more payments, paying off a 30-year mortgage can be much more affordable on a monthly basis.
>> Read More: 15-Year vs 30-Year Mortgage
Does a 30-Year Mortgage Make Sense For Me?
Most homebuyers choose a 30-year mortgage. That’s because these mortgages can be easier to qualify for and easier to afford than shorter-term loans.
To decide whether to give you a loan, mortgage lenders look at the ratio of your total debt payments, including your mortgage and other monthly liabilities, relative to your income. This is called your debt-to-income ratio, and it typically needs to be below 43% to get approved for a mortgage loan.
The good news is that since a 30-year mortgage comes with lower monthly payments than shorter mortgage loans, your debt-to-income ratio will also be lower, making this loan easier to qualify for. With shorter-term loans, you’ll either need to earn more or buy a cheaper home to achieve the same ratio.
Benefits of a 30-Year Fixed-Rate Mortgage
Here are some key benefits of a 30-year fixed-rate loan:
- Monthly payments will be smaller than with a 10-year or 15-year mortgage.
- Qualifying for a 30-year mortgage is easier than qualifying for a shorter-term mortgage thanks to lower monthly payments and a lower debt-to-income ratio.
- Your payment and interest rate are fixed for the life of the loan, unlike with an adjustable-rate mortgage, which may have a lower starting annual percentage rate (APR) but which could see payments increase over time.
Downsides of a 30-Year Fixed-Rate Mortgage
There are also some big downsides to a 30-year fixed-rate mortgage:
- It could take you most of your career to pay off your home.
- Choosing a mortgage loan with a shorter repayment term would likely also qualify you for a lower interest rate
- You will pay more in total interest thanks to the higher rate and the longer amount of time interest has to accrue.
30-Year Mortgage Refinance vs 15-Year Mortgage Refinance
Many people who have an existing mortgage decide to refinance it to reduce their rate or lower their monthly payments. If you decide that refinancing is right for you, you’ll need to select your new loan term. The decision between a 15-year and 30-year refinance loan can profoundly affect your finances.
Here’s how a 15-year refinance would compare with a 30-year refinance in terms of payments and total costs.
|Loan Term||Loan Amount||Interest Rate||Monthly Payment||Total Interest Paid|
|15 years (180 months)||$300,000||3.20%||$2,101||$78,130|
|30 years (360 months)||$300,000||3.75%||$1,389||$200,165|
If your goal is to lower your monthly payments, a 30-year refinance loan likely makes the most sense. But if you have plenty of income, good credit score, and want to maximize your interest savings, you should consider a 15-year refinance loan instead.
This is just an example of how your loan term can affect your costs. You should use our mortgage refinance calculator to compare the terms of loans you’ve been offered by potential lenders to see which loan makes financial sense for you.
Also, remember that your mortgage payments are just the start of costs you’ll pay as a homeowner. Other costs may include:
- Origination fees and other closing costs
- Private mortgage insurance (PMI) is required for homebuyers who put a down payment of less than 20% on their homes.
- Homeowner’s association (HOA) fees
- Property taxes
- Homeowners insurance