30 Year Fixed Rate Mortgages

30 Year Fixed Rate Mortgages

There are many different types of mortgage loans to choose from. The Standard The 30 year fixed home mortgage loan is the basis for all home mortgages. The best thing about a 30 year fixed rate mortgage is it's stability and predictability. There are ups and no downs in mortgage payments because, as the name implies, the interest rate stays the same.

With a 30 year fixed mortgage all of the payments are the same except for the final payment. After making your first mortgage payment (assuming a $100,000 mortgage for example) you can then calculate the interest portion of your payment as follows: 7% times the mortgage balance before the payment is made, $100,000 = $7,000, divide that by 12 months and you end up with $583.33 interest. Next you will subtract that from your payment of $665.31 and there is $81.89 left. This is the portion that goes to reducing the mortgage balance.

The interest portion of your mortgage payment goes down and the principal reduction goes up. The final payment is always less than the others. The reason for this is that when the amortization calculation occurs there is almost always a fraction beyond cents (e.g. $665.3024952 is the actual calculation for our loan) and this is rounded up. This makes the last mortgage payment smaller than the others because of the very small additional principal reduction. If this were not the case then the final payment would be larger than the others and the loan, by definition, would be considered a "balloon" mortgage loan.