What Is a 30-Year Fixed-Rate Mortgage?

A 30-year fixed-rate mortgage is a loan with an interest rate that stays the same for 30 years. Unlike adjustable-rate mortgages, the interest rate on a fixed-rate mortgage remains constant for the entire term. 30-year fixed-rate mortgages are the most popular mortgage products for first-time borrowers. They make sense for borrowers who want to know exactly how much their monthly mortgage payments will be.

How does a 30-year fixed-rate mortgage work?

When you have a 30-year mortgage with a fixed-rate, your property taxes and insurance may change over the 30-year period, but your combined principal and interest payment will remain the same every month for the entire loan term.

Mortgage payments are divided into principal and interest payments. At first, a larger portion of the payment will go toward interest to your lender to cover the cost of borrowing. As you make more payments, you’ll gradually lower the balance you owe on your mortgage — meaning a larger portion of the payment will go towards your loan’s principal. This is because interest is only owed on the remaining principal balance. A smaller balance means a smaller interest payment.

You can use our Amortization Calculator to estimate how much you’ll spend in interest over the 30-year term. A $300,000 mortgage with a fixed interest rate of 6% would cost you $347,515 in interest, even though you only borrowed $300,000. Your mortgage payment would be $1,799 each month (not including taxes and insurance). In the first month, your $1,799 payment would be divided into a $1,500 interest payment and $299 principal payment. In the last month (30 years later), you’d pay $9 in interest and $1,791 in principal — paying off your mortgage. 

Can you pay off a 30-year mortgage early?

Yes, you can pay off a 30-year mortgage early, but you might incur prepayment penalties. Paying off your mortgage early helps you save on interest payments, but prepayment penalties could cancel those savings, depending on the lender’s policies. Be sure to check with your mortgage lender to make sure prepayment is possible and worth it.

Types of 30-year fixed-rate mortgages

There’s a variety of 30-year fixed-rate mortgages available. Considering whether a conventional, jumbo, FHA, USDA, or VA loan is best for you depends on your financial and homeownership goals. 

Conventional loan

Conventional loans are not insured by a government agency, such as the Federal Housing Administration (FHA) or the Department of Veteran Affairs (VA). Instead, they’re bought and sold by Fannie Mae and Freddie Mac. Because of this, the private lenders that offer this type of loan set different qualification requirements to protect themselves and reduce their lending risk. The extra precautionary measures lenders take allow them to offer conventional loans with fewer restrictions than you might find with a government-backed loan, such as higher loan limits and no property type restrictions. However, conventional loans often require a higher down payment and private mortgage insurance (PMI) that falls off once you hold 20% equity in the home you purchase.

Jumbo loan

Jumbo loans are also considered conventional mortgages, but they’re non-conforming, which means they exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Non-conforming loans can’t be insured by Fannie Mae and Freddie Mac, making them riskier for lenders to issue. As a result, jumbo loans are usually more expensive and less available than conforming loans. Not all lenders offer jumbo loans, but those that do, typically require 700+ credit scores, 12 months’ worth of cash reserves, and lower debt-to-income (DTI) ratios compared to conventional conforming loans.

FHA loan

FHA loans are mortgages guaranteed by the Federal Housing Administration (FHA). FHA lenders provide affordable home loans with less stringent criteria to a wide range of borrowers who meet the FHA’s property and loan limit requirements. 

Borrowers can qualify for an FHA loan with a down payment as small as 3.5% and a credit score as low as 580. Lenders also look for a DTI ratio less than 43% and steady employment. Since FHA loans have more lenient requirements, FHA borrowers usually have to pay a mortgage insurance premium (MIP) that remains with most borrowers for the full 30-year term. 

VA loan

VA loans are mortgages backed by the Department of Veteran Affairs (VA). Similar to FHA loans, VA loans have lenient borrowing terms and lower interest rates than conventional loans. However, VA loans are only available to veterans, active-duty military, and qualifying military spouses. You’ll need a Certificate of Eligibility (COE) to prove your VA status. VA borrowers enjoy no down payment and no PMI requirements.

USDA loan

USDA loans are mortgages backed and offered by the U.S. Department of Agriculture (USDA). They help low- to moderate-income borrowers purchase homes in rural and suburban areas throughout the country. Qualifying borrowers enjoy no down payment requirements, lower mortgage insurance premiums, and more competitive interest rates than traditional borrowers. 

There are two types of USDA loans: USDA Direct Loans, which are issued directly through the USDA, and USDA Guaranteed Loans, which are issued by private lenders and guaranteed by the USDA. 

Pros and cons of a 30-year fixed-rate mortgage

Although many borrowers prefer a 30-year fixed-rate mortgage, you may decide it’s not the right loan for you. Consider the pros and cons of taking out a 30-year fixed-rate mortgage.

Pros

Low and predictable payments: Out of all traditional, fixed-rate loans, 30-year fixed-rate mortgages offer borrowers the lowest and most predictable monthly payments. Manageable mortgage payments allow greater financial flexibility throughout the life of your loan. 

Increased buying power: Compared to a 15- or 20-year mortgage, a 30-year mortgage allows you to buy a more expensive home. This is because mortgage approval is based on your ability to make lower monthly payments. 

Low rates, locked-in: Fixed-rate loans lock in one interest rate for the duration of the loan term, which means you won’t have to worry about fluctuating monthly mortgage payments.

Cons

Slow equity growth: Most of your monthly mortgage payments go towards interest payments in the beginning of your 30-year term, which means you’ll build equity slowly. 

Risk of over-borrowing and over-spending: Receiving a larger loan allows you to buy a more expensive house, but it could also cause you to borrow and spend more than you need. A more expensive home often comes with higher property taxes, utility costs, and maintenance expenses. 

Higher interest rates and more total interest paid: 30-year fixed-rate mortgages usually carry higher interest costs than short-term loans. Since lenders can’t raise the interest rate in the future, they offer fixed-rate loans at a slightly higher interest rate than variable-rate loans. Check out the current rates to compare.

Is a 30-year mortgage right for you?

Long-term, 30-year mortgages make sense for borrowers who want to keep their monthly payments as low as possible and don’t mind paying more interest over time. However, if you want to pay off your mortgage as soon as possible and pay minimal interest, a 20- or 15-year mortgage might be a better option. 

Borrowers who don’t plan to stay long in the house they’re buying might prefer an adjustable-rate mortgage (ARM). ARMs allow borrowers to lock in a lower interest rate for the first 3 to 7 years and sell or refinance the house before the interest rate goes up. 

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