Programme
30-Year Fixed
Three hundred and sixty payments of principal and interest that never change.
The 30-year fixed is the default American mortgage, and the reason is not that it is cheap — it is that it is predictable. The interest rate is set for the whole term and the principal-and-interest payment is the same in month 360 as it was in month one. Two things follow that people are regularly surprised by: the total payment does move, because taxes and insurance are not fixed, and the balance comes down far more slowly at the start than intuition suggests.
- 360 level principal-and-interest payments
- The rate cannot change
- No prepayment penalty on an ordinary loan
- The lowest required payment of the fixed terms
Floor four
What it gives you
The rate risk belongs to the lender for thirty years
You have bought an option: whatever happens to rates, your principal and interest are unchanged, and if rates fall you can refinance. The lender carries the other side of that for the whole term. It is the reason a fixed rate is priced above an adjustable one at the start.
The required payment is the lowest of the fixed terms
Spreading the same balance over 360 months rather than 180 makes each payment much smaller, which is what makes a given house affordable at all for most households.
You can behave like a 15-year borrower without signing up as one
There is no prepayment penalty on an ordinary 30-year fixed loan, so you may overpay to a shorter schedule whenever you can and stop when you cannot. The 15-year rate is lower, but the 30-year keeps the option.
It is the most portable product in the market
Every lender writes it, every investor buys it, and comparison between offers is genuinely like for like — which is not true of adjustable, non-QM or jumbo products where structures differ.
Floor three
What this programme costs you
Every programme buys you something by charging you something else. This is the half a brochure leaves out, and it is the half that decides whether the programme is right for you.
- Trade-off 01
"The payment never changes" is only true of half the payment
Principal and interest are fixed. Property taxes and homeowner's insurance are not, and on most loans they are collected with the payment through an escrow account that is re-analysed every year under RESPA. A reassessment after a sale, or an insurance renewal in a hardening market, can move the total payment by a meaningful amount with no change to your loan at all. Budget for the whole payment, not the fixed part of it.
- Trade-off 02
You pay for the certainty, every month, whether or not you need it
The 30-year fixed rate is priced above the 15-year rate and above an adjustable-rate loan's opening rate. That premium is the cost of an option you may never exercise. Someone who knows they will sell in five years is paying thirty years of insurance against a risk they do not carry.
- Trade-off 03
The early years barely touch the balance
Interest is charged on the outstanding balance, so at the start almost the whole payment is interest and only a sliver reduces principal. Run the amortisation schedule and look at what is still owed at year ten — for most borrowers it is a much larger fraction of the original loan than they expected, and it explains why selling early rarely leaves the equity people assume.
Floor two
The published rules, and where they come from
These are rules, not prices. This site publishes no rates, so what follows is the part of the programme that is written down somewhere a third party can check.
| Rule | What it says | Source |
|---|---|---|
| Term and structure | 360 monthly payments at a rate fixed for the whole term. The principal-and-interest payment is identical every month. | Standard level-payment amortisation; Fannie Mae Selling Guide B2-1.4-01 |
| How each payment splits | Interest each month is the outstanding balance times one twelfth of the annual rate; everything else reduces principal. Because the balance starts high, the early payments are almost entirely interest. | Level-payment amortisation — see this site's amortisation schedule |
| What is not fixed | Property taxes and hazard insurance. Where they are escrowed, the servicer must run an annual escrow analysis and may adjust the monthly collection. | 12 CFR 1024.17 (RESPA escrow accounts) |
| Mortgage insurance | On a conventional 30-year loan above 80% loan-to-value, borrower-paid PMI applies and cancels at 80% of the original value on request and 78% automatically. On an FHA 30-year loan the annual premium runs for the life of the loan above 90% LTV at origination. | 12 U.S.C. 4902; HUD Mortgagee Letter 2013-04 |
| Prepayment penalty | Regulation Z permits a prepayment penalty only on a fixed-rate Qualified Mortgage that is not higher-priced, and caps it. Ordinary 30-year fixed loans carry none, so overpaying is free. | 12 CFR 1026.43(g) |
| Loan limit | At or below the county conforming limit the loan is conforming; above it, it is a jumbo loan underwritten to the lender's own rules. FHFA sets the limits annually. | 12 U.S.C. 4542; FHFA Conforming Loan Limit Values |
Floor one
Who it fits
The usual guidelines. Every one of them is a starting point that an underwriter reads against the whole file, so treat a line you miss as a conversation rather than a closed door.
- Credit, income and assets sufficient under whichever programme the loan is written to
- The term is available on conventional, FHA, VA, USDA and jumbo loans alike
- Private mortgage insurance applies on a conventional loan above 80% loan-to-value
- The loan amount decides whether it is conforming or jumbo, which changes the rulebook
- The property may be a principal residence, a second home or an investment property
- A documented, verifiable source for the down payment and the closing funds
Ground floor
How it goes, top to bottom
Price the whole payment, not the loan
Principal, interest, taxes, insurance, any association dues and any mortgage insurance. The last three are what turn an affordable-looking loan into an uncomfortable month.
Decide what you are really buying with the fixed rate
If you expect to move within a few years, compare the fixed rate against an adjustable one whose fixed period covers your horizon. If you expect to stay, the certainty is worth paying for.
Pre-approval
An underwriter reads your documents and tells you what the file supports. It is not a rate lock and it is not a commitment to lend.
Appraisal and underwriting
The value is established and the conditions are cleared. Anything that changes your income, your debts or your bank balances during this window has to be disclosed.
Closing, and then look at the schedule
Read the Closing Disclosure against the Loan Estimate. Then look at the amortisation schedule once, properly — it is the clearest thing anyone will ever show you about what this loan costs.
The 30-year against the 15-year, at the same rate environment
| Feature | 30-year fixed | 15-year fixed |
|---|---|---|
| Number of payments | 360 | 180 |
| Monthly principal and interest | The lower of the two | Roughly 1.4 to 1.6 times the 30-year payment, depending on the rate |
| Total interest over the term | Substantially more | Substantially less |
| Rate offered | Priced above the 15-year | Priced below the 30-year |
| If money gets tight | The required payment was always the low one | The high payment is contractual |
| Flexibility | You may overpay toward a shorter schedule and stop whenever you need to | The shorter schedule is committed |
| Price you qualify for | Higher, because the payment in the debt ratio is smaller | Lower, because the payment in the debt ratio is bigger |
This table scrolls sideways on a narrow screen.
Questions this raises
If the rate is fixed, why has my payment gone up?
Almost certainly the escrow account. Principal and interest cannot change on a fixed-rate loan, but property taxes and homeowner's insurance can, and the servicer re-analyses the escrow account each year under RESPA. A county reassessment following your purchase and an insurance renewal are the two usual causes, and either can move the total payment without your loan changing at all.
Should I take a 30-year and overpay, or take a 15-year?
The 15-year rate is lower, so paying a 30-year down over fifteen years costs more in interest than a 15-year loan would have. What you get for that difference is the right to stop. If your income is variable, or your reserves are thin, the option to fall back to the smaller required payment can be worth more than the rate saving. The extra-payment calculator will show you both numbers side by side.
How much of my first payment goes to principal?
Less than most people expect. Interest is charged on the whole outstanding balance, and at the start the balance is at its maximum, so the interest portion is at its maximum too. The share going to principal rises every month, slowly at first and then quickly near the end. The amortisation schedule on this site shows the crossover month for your own numbers.
Can I pay extra without a penalty?
On an ordinary 30-year fixed loan, yes. Regulation Z permits a prepayment penalty only on a fixed-rate Qualified Mortgage that is not higher-priced, and caps it tightly; the great majority of these loans have none. Check your note rather than assume, and when you do overpay, say in writing that the money is to be applied to principal.
Put your own numbers through it
Where does each payment go? The amortisation page prints the rule it followed beside the answer, and the address bar carries your inputs so the link you send is the answer you saw.
Or read every programme side by side.