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Why the 30-Year Fixed-Rate Mortgages Are the Safest

Risk is one of the major factors to take into account when you are shopping around for a mortgage. Usually, risk and cost are inversely related so many borrowers are willing to assume more risk for the sake of saving. This can be a costly mistake, however. According to experts, the 30-year fixed-rate loans come with the lowest possible risk. Consider the benefits that you will enjoy with such a loan.

No Interest Fluctuations

The interest rate on a 30-year mortgage stays the same for the entire term. This means that you are effectively shielded from market fluctuations in the short term and in the long term as well. When you have a fixed interest rate, the monthly payments are fixed as well. This makes budgeting and the management of the repayment much easier. You will not have to worry about shock payments, which are associated with adjustable rate loans.

Small Monthly Payments

The payment of fairly small monthly installments is the major benefit of the 30-year fixed-rate home loans. Since the interest is spread over a longer term, the monthly interest amount which you owe the lender is much smaller. Hence, the entire installment is smaller as well. This puts you at a lower risk of default in comparison to borrowers who use loans with a term of 15, 20 or 25 years. In fact, since the 40-year programs are rare, it can be safely said that you will assume the lowest risk of default with a 30-year program.

Larger Principal

Since the 30-year loan gives you the opportunity to spread the interest payments over a longer period of time, you can choose to borrow more money while keeping the monthly payment within your budget. This is highly beneficial in case you do not have sufficient savings for making a large down payment. With this option, you can buy a bigger and better house. At the same time, you will be perfectly confident that you will be able to repay your debt without delays and interruptions.

Slow but Steady Equity Building

It is true that equity is built more slowly with 30-year mortgages, but this will be a steady process which will not put your income, savings and home at risk. There is little point in trying to get equity more quickly when there is a much higher risk of losing the property. Eventually, you will gain full ownership of the house.

Flexibility

It is true that the 30-year home loans are costlier compared to their counterparts with shorter terms. However, this does not mean that you do not get an opportunity to save. You can readily devise a plan for early repayment of the loan so that you can save on the interest amount. Alternatively, you can use refinancing to get lower interest and better terms and conditions.

In general, it is easier to refinance a 30-year loan than to extend a 15-year one. The longer term gives you not only lower risk but also more room for strategizing the repayment. This can help you lower the risk further and save money.

You should definitely consider taking out a 30-year fixed-rate mortgage loan.

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What to Look for When Comparing Mortgage Lenders

It is certainly difficult to select among the numerous mortgage lenders offering financing products to home buyers. You have to be certain that you will be able to work effectively with the lender in the long term. Take a closer look at the main criteria to base your comparison on. Use them to make the right choice.

Convenience

The mortgage lender that you select must make the entire process as easy and quick for you as possible. You would not want to fill out an endless number of forms. Similarly, you would not want to wait for weeks to get the verdict on your application. Check how each lender works by looking at reviews available online. You should check with the Better Business Bureau as well. Do not miss to ask your real estate agent as they can give you a pretty clear picture of how each bank works.

Reliability

You have to ensure that the lender will keep their word and that they will not set any loopholes or traps in the agreement. For this, you need to check each and every clause very carefully. Make sure that you know how the interest rate, fees and monthly payments are calculated. Look into the recent history of the bank and check whether there have been complaints and claims from customers.

The financial stability of the lender is extremely important as well. If the bank goes down, your loan can be transferred to another one and this can cause changes to the agreement which may not be favorable for you. It is important for you to deal with an institution that has long-term traditions and excellent reputation in the industry to avoid unpleasant surprises in the future.

Flexibility

It is essential for the mortgage lender to be willing and able to show some flexibility especially when it comes to the repayment of the loan. Anything can happen and you may end up struggling to make the monthly payments. In this case, a flexible bank should be able to offer a program to help you out. Look for a lender that will be able to offer refinancing at better terms, extend the term of the loan or offer a more affordable repayment scheme.

In general, they should be able to offer a loan which matches your needs precisely. If they are not willing to work with you and to devise the best solution, then you will probably be better off dealing with someone else.

High Quality Customer Service

Most borrowers will keep their home loan for at least 10 years. This is a long time to be in a relationship with a financial institution. That is why you need to make sure that you will get the treatment that you deserve. It is easy to recognize a lender that offers customer service of high quality. You will have all your questions answered. You will get complete explanation and full assistance every time when needed. You will be kept current on everything that is going on with your loan.

Finally, it is really important for you to use as much information as possible during the comparison of mortgage lenders. Get references from people that you know and from your realtor as well.

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