The 30-year mortgage has roots as far back as the 1920s. During this era, a home purchase was financed as a five-year loan with a 50% down payment and a balloon payment at the end of the five years.
Since most borrowers wanted to remain in their homes, they had to keep refinancing the loan balance into another five-year loan until it could ultimately be paid off.
These loan terms made it difficult for most people to buy homes because it was hard to come up with 50% down.
Fortunately, the advent of the Great Depression in the 1930s motivated the creation of 30-year mortgages because it was felt that buyers could better afford the payments that 30-year mortgages created and that younger buyers could pay off the mortgages before they retired.
The 30-year mortgage increased homeownership because more people could qualify to buy homes.
As time has evolved, so have mortgage offerings. Even though people move more often today, the 30-year mortgage is still the loan of choice because the payments are more affordable.
For those seeking to pay off their mortgages in a shorter period of time, there are 15- and 20-year options. While the interest rates are lower over the life of these loans, the payments will be higher.
As your mortgage professionals, we can review your financial status and present to you your mortgage choices to determine which loan best fits your needs. We’re here to help!
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