30 Year Home Loans: Is It The Right Choice For You?

It is one of the top choices for most borrowers because the total payments are extended over a longer amount of time with interest rates set for the whole time of the mortgage.  30 year home loan rates continues to be an industry standard, but is it the right choice for you?

One of the greatest advantages about a 30 year home loan is the lower monthly payments it offers.  On the other hand, the bad thing about this type of loan is that you will pay thousands extra in interest over the entire period.  You will be able to get some of this interest money back, however, since it is completely tax deductible.  Another good thing about this loan is that you will be able to pay it off in less than 30 years provided that your financial situation changes, this while maintaining the low monthly payments.  Because your payments are smaller, you could afford to buy even a bigger roomier home.

Here is an example of the interest difference between 30 year home loan rates and one of the other rates.  On a 30 year, 200,000 dollars loan with 7% interest rate your monthly payment of interest and principle would be $1330.60 dollars. Over the next 30 years you will end up paying $279,016 in interest alone.  If you have a 15 year home loan rate on this same amount you will pay $ 1742.21 per month and over the next 15 years, you would pay $113,598.  This will save you $165,418 dollars.

If you believe that you could invest the savings from the monthly payments, a 30 year mortgage loan could very well be a great choice for you.  A big advantage will be if you can find an investment that the long term payoff matches or exceeds what you can save in a 15 year mortgage.  Something else you might want to consider is how quickly you want to accrue equity in your home or to own it out right.  Equity takes much longer to build with 30 year home loan rates.

The vast majority of home buyers end up getting a 30 year home loan because the home loan rates are still low and they’ll get a fairly good monthly payment compared to the 15 year old loans.  Some loan companies will offer borrowers 40 year home loans and in certain occasions a 50 year home loan, but the interest of these will be much higher and you will end up paying a huge amount of money in the long run of the loan. 

When deciding which the right home loan is for you, there are many options for you to consider.  Probably the best thing you could do is to ask yourself what are your financial goals?  It is best for you to revise all the available options so that you can find what will work better for you and your financial goals.  Which will be the loan plan that will eventually help you the most to reach your desired goal?  You will see that it might actually surprise you that because of your personal situation there may be other plans more appropriate for you.

Want to compare 15 year loans vs 30 year loans to see which one is better for you?  Click here to use our free 15 Year Loan Rate Vs 30 Year Loan Rate Calculator.

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