30-Year Fixed Rate Mortgage

For generations, the 30-year fixed rate mortgage has reigned, like hot dogs and apple pie, as America’s gold standard.

We love it for its predictability and affordability. A 30-year fixed mortgage is a fully amortizing loan, meaning the principal and interest are combined. When the 30 years are up, the full amount will be paid off.

With all this boosting it, there’s little wonder the 30-year-fixed remains America’s favorite type of mortgage: Despite abundant options at record-setting low rates, 90% of homeowners still choose a 30-year fixed mortgage, according to Washington-backed mortgage-guarantor Freddie Mac.

What Is a 30-Year Fixed Rate Mortgage?

A 30-year fixed rate mortgage is designed so that you will owe nothing on your home if you make every scheduled payment for 30 years. These mortgages are the apple pie à la mode of secured credit. Homeowners (especially those with good-to-excellent credit) get:

• A low, unchanging interest rate
• A steady, affordable payment
• A larger loan (and, in all probability, more house).

Wait, there’s more. As their income grows, homeowners can make extra payments against principal to pay off the mortgage faster. Prepayment penalties do exist, but they are rare.

And if rates sink, you can always refinance!

Components of a 30-Year Fixed Rate Mortgage

A 30-year fixed rate mortgage payment goes into four categories.

• Principal: The amount you borrow to buy your home is called the principal. For example, if you purchase a $350,000 home and make a 20% down payment of $70,000, you would and borrow the remaining amount of $280,000, which is your principal.
• Interest: Lenders make money by charging you a percentage of the amount you borrow. This is called interest. This percentage may remain the same (fixed rate) or change (variable rate) during the term of the loan. Most of what you pay early in the loan will go toward interest.
• Escrow: Part of your mortgage payment is put aside to pay costs such as property taxes and homeowners’ insurance. This is called an escrow account.
• Mortgage insurance: Mortgage insurance protects the lender against losses in case you default on your loan. Your type of loan, loan amount, down payment and credit score can affect the cost of mortgage insurance. A down payment of 20% or more means you won’t have to pay for private mortgage insurance on conventional loans, but this is not the case for FHA loans.

Average 30-Year Fixed Mortgage Rate

As of mid-March 2025, 30-year fixed-rate loans average 6.68%, a decline from more than 7% in early 2025 and more than 8% in October 2023. This is the lowest rates have been since October 2024.

These rates follow the Federal Reserve announcing it won’t change its benchmark rate in the near term. The Labor Department also recently reported that inflation had cooled to 2.8 percent, which makes it less likely that mortgage rates would soon increase.

Recession fears and economic uncertainty concerning President Donald Trump’s tariff policies has lowered yields on 10-year Treasury bonds, which also argues against mortgage rates rising.

The average 15-year refinance interest rate is 5.88%, following the same trend as the 30-year rate.

*Source: myFICO (January 29, 2025)

As the chart above shows, the most affordable rates go to those with a credit score of 680 and above, with the best rates reserved for scores 760 and above. That isn’t to say you won’t be approved for a mortgage with a lower credit score, you’ll just pay more to borrow that money.

In fact, credit scores are not the biggest factor in determining whether banks approve a mortgage. A survey by The Fair Isaac Corporation (FICO) says that poor debt-to-income ratio (DTI) is the No. 1 reason mortgage applications are denied. Lenders want the ratio to be under 30%.

Is It a Good Time to Buy a Home?

It’s tricky, especially given the economic uncertainties around a new presidential administration’s policies. Mortgage rates have dipped since they peaked at over 8% in 2023, and some experts think they may lower slightly this year. The number of homes for sale has gone up in many markets, which lessens the pressure to raise prices.

But buying a house is an intensely personal experience — in many ways, the ultimate microeconomic decision.

Whatever else is going on in the residential market space, whether it’s a good time for you to buy is dependent upon factors such as these:

• You have access to a substantial down payment (without exhausting your emergency fund).
• You are confident about the stability of your household income, not only to meet the payments, but also to take care of upkeep and weather financial surprises.
• Your credit score is in good shape.
• You can be happy for a number of years in the house and neighborhood you can afford.

Factors Influencing 30-Year Fixed Mortgage Rates

How much you’ll pay for a mortgage depends on several factors, some of which you have at least somewhat control.

• Credit score: Your credit score is a signal to lenders about your ability to keep up with your payments. The better your score, the better rate lenders are willing to offer.
• Down payment: The more money you put down on a home, the less you’ll have to borrow. Lenders offer better rates to buyers with a larger down payment. Higher down payments equal lower monthly payments.
• Location: State laws and regulations where you’re buying can affect interest.
• Loan type: Different types of loans offer different interest rates. Conventional loans often have higher rates than VA loans.
• Market factors: A variety of market factors influence mortgage interest rates. Rising inflation tends to raise interest rates. Rising or falling unemployment rates also influence interest. Of course, the demand for housing plays a factor. When demand falls, lenders might drop rates to entice buyers.

Pros and Cons of the 30-Year Fixed Mortgage

If even scrumptious, irresistible apple pie à la mode has its downsides, so must America’s favorite mortgage. Let’s have a look at the good and the not-so-good.

Pros of a 30-Year Fixed Mortgage

• Low monthly payments: Assuming identical principal balances, a 30-year fixed-rate mortgage offers the lowest monthly payment among traditional fixed-rate loans.
• Flexibility with payments: The lower payment will allow you more flexibility if you run into financial trouble — a layoff or a prolonged illness, for instance. Or, if your household income grows, you will be in a position to make larger or extra payments, reducing the length of the mortgage and lowering the amount of total interest you pay. In other words, you can turn a 30-year mortgage into a 15-year mortgage simply by adding a few hundred dollars to monthly payments.
• Predictable payments each month: A lower predictable payment also means, when times are good, being able to fund other priorities like home maintenance, education, retirement saving, vacation planning, etc.
• Low rates are locked in for 30 years: If you are fortunate enough to get a lower mortgage rate, that rate is fixed for the life of the loan. Variable interest rates can change as the economic winds blow.
• More house: Because applicants qualify based on their ability to make payments, a 30-year fixed-rate loan allows you to pursue a more expensive house.
• Tax deduction for mortgage interest (maybe): Current tax laws still allow homeowners to deduct mortgage interest from their taxable income, and the 30-year fixed-rate mortgage involves the highest interest payments. However, the arrangement comes with a caveat. Once the linchpin for filers who itemize, the mortgage-interest deduction lost much of its allure with passage of tax reform in 2017, which — in a nod to simplification — included massive increases in the standard deduction. Consult a tax expert about whether your deduction will make itemizing worthwhile.

Cons of a 30-Year Fixed Mortgage

• Higher interest rate: The longer a lender’s risk of being repaid is stretched out (and the longer the lender’s money is tied up), the higher the interest rate tends to be; customarily, the difference between 15- and 30-year loans is about a half-point.
• More total interest paid: Again, assuming both loans are paid according to schedule and held for the duration of their terms, borrowers with 30-year mortgages pay far more interest — about 60% more — than those with 15-year loans.
• Sluggish growth in equity: Because a lion’s share of each payment during the first 10 years goes to interest, homeowners with 30-year mortgages build little home equity through their own efforts. (This is a minor consideration in traditional circumstances, when real estate tends to appreciate.)
• You may over-borrow: Because you can qualify for more house, you may be tempted to push your personal financial envelope. Maxing out may leave you ill-prepared for life’s surprise detours.
• More expensive upkeep: Other factors being equal, if you go for the pricier house, you’re likely to encounter — at minimum — a steeper property tax bill. If the pricier house isn’t simply in a more desirable location, but it’s larger, you’re looking at higher maintenance and, probably, utility costs.
• Not ideal for borrowers on the move: A better loan would be a 3-year or 7-year Adjustable Rate Mortgages (ARM), which has a variable interest rate with a lower introductory rate. Ideally, you would have sold the house by the time the variable rate rises past the alternative fixed rate.

30-Year Fixed Mortgage vs. 15-Year Fixed Mortgage

The chart below compares a 30-year fixed mortgage on a $300,000 home to a 15-year fixed mortgage on the same home. It also compares how much you’d spend buying a $250,000 home with a 15-year mortgage and how much money you would save.

One number should jump out at you: Total interest paid on a 30-year fixed mortgage is more than the value of the home itself. You’ll spend $207,000 more over 30 years than you would for the same home with a 15-year fixed mortgage.

When comparing mortgage loans, you are really comparing houses. The cost of the monthly payment for a $300,000 house on a 30-year fixed mortgage is close to the monthly payment on a $250,000 house with a 15-year fixed mortgage.

As the chart shows, there are huge savings if you buy a little less house and pay it off in 15 years.

*credit MortgageCalculator.com

Dos and Don’ts When Looking for a Mortgage

Buying a home is a big responsibility, and you will want to make sure you are prepared to take on such a large debt. While you’re filling out the columns, consider these recommendations.

Dos When Looking for a Mortgage:

• Start by calculating how much you can afford each month.
• Consider how long you plan to stay in the house. You might have a job that requires you to move frequently.
• Do you plan to start a family? You should anticipate how much space you’ll need.
• Is the house near good schools?
• Can you reasonably expect the house to improve in value?

Don’ts When Looking for a Mortgage:

• Don’t borrow your limit on a 30-year mortgage. You might love the backyard or the walk-in closet, but that money could be used elsewhere. You’ll need to build an emergency fund should something bad happen. If the refrigerator breaks or you need to repair the roof, you need to have cash on hand to handle these kinds of problems. You should also have money to set aside for retirement savings.
• Don’t put less than 20% down. Otherwise, you’ll need private mortgage insurance (PMI) to protect the lender in a foreclosure. Plus, a 20% down payment keeps your monthly payments affordable.

The word mortgage literally translates to “death pledge”. Seems like a rather ominous word to associate with something you’ll “live” in, but no, that isn’t referring to mortgages as a suicide mission.

It actually means the pledge dies when you fulfill your obligation. A 30-year fixed mortgage is an awfully slow kill, but in the end, you’ll have a happy place to call your own.