30 Year Mortgage Loan

30 year fixed rate mortgage loan program.

The most common home loan is the 30 year mortgage. Made popular during the transition between when homes had a mortgage of 20,000 dollars and started to increase in early 40's 50's and 60's. The 30 year is still held as one of the most recognized mortgage programs in existance.

The 30 part is what is called amortization so the interest you will pay and original loan amount is amortized or spread over 30 years, with the interest being due first. How it works is breifly that the lender will use a calculation tool of a 12 day year. So you pay 1 -12th(1/12) of the interest calculated against the previous months loan balance. So if your rate is 8%, then the amount of interest you will pay is .6 percent of the loan balance. The remaining difference in payment will be applied to the mortgage balance. As each month passes, your mortgage balance will be reduced and therefor the amount of interest you pay will be reduced, allowing more to be applied to the loan balance, or what is call the principle balance.

If your objective is to get the absolute lowest payment you can, the 30 year is one of the ways. Albeit not the best way, it is more of a secure low risk loan program, with a decent term. If you are comfortable with the 30yr, an interest only option may be added to loan which will reduce your payment even further. Although, as the name implies you will not be paying any principle each month, this option allows a little more flexibility. Since the interest only portion of this program is calculated on the unpaid balance, anything you pay over and above the interest payment, comes directly off the principle balance. This action consequently reduces the amount of interest due each month, so if you continue to pay more than the interest due, since the interest is spread over infinity, you will pay your loan off faster than a regularly amortized mortgage. Again, we suggest speaking with an expert lender before considering any program. Depending on what the objective is for you and your home, either of these option could work wonderful for you, or may not be the ideal solution.