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Advantages Of A Direct 30 Year Mortgage

The past 20 years has seen a tremendous growth in the number of products offered by banks and other lending institutions that offer loans for real estate. The ARM, no-down or 100% financing, no credit check, or 15-year and some 40-year loans. But a direct 30-year mortgage is still the standard and the most sought after.

Although the other, more creative terms have their attractors, it is impossible to predict the future and that is where the problem lies with many other loan products. The enticements are plentiful and very tempting, but don’t be lured into any loan where the terms change at some point in time or one that you are not paying down the principal. Here are some reasons to go for a fixed-rate 30 year mortgage.

Stability
Banks are in the business of making loans for real estate and other purposes. The stability of the bank and it’s assets is key to their financial success and that of their stockholders. All of whom rely on steady dividends and appreciation. Which means banks are steady in both areas, and that means their portfolio needs to be stable and there is nothing more stable then the direct 30 year mortgage they offer for homeowners.

But they are not the only ones who have an advantage, the borrower is even more at an advantage. The terms will never change as long as the note is still outstanding and that creates a very stable situation for anyone. As their incomes rises over time the percentage that goes toward the mortgage actually decreases, allowing more discretionary income available for that Hawaiian vacation.

Fixed Payments
Because the terms are for 30 years with fixed payments, the borrower has no need to worry about increase due to any economic situations. As long as the fixed payments are made on time, there will be no additional charges. Unlike an ARM or interest only loan or even renting, the borrower is never surprised at the payments.

Guaranteed Equity
Real estate has always been seen as a long term appreciation of assets. As a borrower pays down his mortgage each month, a higher amount of equity is added to the portfolio. Along with the appreciation of the asset due to time alone, the guaranteed equity continually increases – over the long haul.

Tax Write Off
The available tax deductions for home loans is decidedly established in the U.S. Most of the tax write off will occur in the early years when the borrowers income and cash flow are often tight. As the years past and the equity increases, so do the payments toward the principal. The interest portion slowly decreases and so do the tax deductions.

Easier to Sell
When it comes time to sell, a new buyer will have to obtain their own loan. It may be slightly easier dealing with the same institution that already has the mortgage on the property. In most cases, since the property was part of the banks portfolio, the risk has already been established on the real estate. The only factor which may influence the loan, and with much more weight, is the new borrower.

Trying to determine the best course of action and other advantages and disadvantages requires that you look into as many lenders as necessary to get the terms and rates that make you comfortable.