The 30 year fixed mortgage is the most common type of mortgage for home financing. To determine if the 30 year fixed type of mortgage is the right type of financing for your home, you need to consider some facts. You also need to analyze your finances. A fixed mortgage of any number of years is serious business and you will need to learn all you can before entering into a mortgage.

The first fact to consider is the length of the 30 year fixed rate mortgage. You will be making monthly loan payments for 360 months, a very long time. Are you in a position that you can be reasonably certain your income will remain the same or grow over the next 30 years? Are you young enough that you will be working for the next 30 years? If not, where will the funds come from to make your monthly fixed rate mortgage payments on time?

Next, you should consider the 30 year fixed mortgage rate. Interest rates on home loans go up and down depending on the economic situation at the time. When you sign up for a 30 year fixed rate mortgage, you will make the same monthly payments regardless of rate fluctuations.

Is there any flexibility with a 30 year fixed mortgage with a fixed interest rate? Yes, there is and this represents a big advantage over shorter mortgage obligations. If you finance your home for 30 years at a fixed rate, you can apply additional funds toward principal any time you wish (some loans have prepayment penalties so research your mortgage carefully). If you pay toward principal regularly, you can pay off your 30 year loan much sooner than 30 years!

The advantage to fixed rate mortgages is that you are not OBLIGATED to pay any more than your regular fixed monthly mortgage payment. If you experience a major repair or other expense, you can pay only the fixed amount. If you get a windfall of money, you can apply toward mortgage principal as much as you wish.

How much can you benefit from paying extra toward mortgage principal on a 30 year fixed mortgage? It can be a huge amount! Below are some examples.

If you finance $100,000 on a home with a fixed rate 30 year mortgage, the payments would be $665 per month if the interest rate is fixed at 7%. Multiply 665 by 360, the total number of payments. You will see that you would pay the lender a total of $239,400 over the 30 year life of the fixed rate mortgage. The payoff date of the loan would be exactly 30 years from the inception of the fixed rate mortgage.

By adding only $100 per month each month to you payment, your payoff date would be approximately 9 years and 6 months sooner!

Better yet, if you were able to add $200 per month toward mortgage principal, your 30 year fixed obligation would be paid off in 16 years and 1 month! Plus, you would save $73,000! That’s a huge savings!

Of course, you could plan to make extra payments toward mortgage principal, but yet have the flexibility of not paying the extra money on months when finances are tight. This is a great advantage over financing for a shorter term. The shorter term mortgage would mean you would be obligating yourself to higher payments every month, no matter what.

The same $100,000 mortgage loan financed over 15 years at the same 7% would mean you MUST pay $898.83 every month without any flexibility. From these examples, you can see easily the advantage of financing over a 30 year period for your fixed rate mortgage!

With the economy changing every day, you never know what the future may bring. Unless you are absolutely certain of your ability to pay for each higher payment on a shorter mortgage, then a 30 year fixed mortgage may be the best way to go.

What happens if interest rates go down significantly during the life of your fixed rate 30 year mortgage? The answer is simple: refinance. If the interest rates change several points, let’s say the 7% rate used in the examples goes down to 4.3%, you can save money by refinancing. You would only be financing the balance of your fixed rate 30 year obligation, and you could then consider financing over a shorter term. The lower interest rate would make payments much lower than you had previously been paying.

As you can see, studying carefully before obtaining any type of loan is crucial. In the case of the 30 year fixed mortgage, you can plan in several beneficial options without making a promise to pay a higher amount. Begin your mortgage investigation by studying the advantages provided by the fixed 30 year mortgage before considering a shorter life loan. You won’t be sorry that you’ve taken the time to know as much as possible before finalizing your home financing!