Water Cooler Wednesday: In Praise of the 30 Year Fixed Rate Mortgage

We recently caught up with Emmanuel St. Germain, vice president at Choice Mortgage Bank in Boca Raton. A veteran mortgage broker, Emmanuel continually de-mystifies the mortgage process and guides clients to the appropriate loan program. Here are some of his thoughts regarding the advantages of a 30-year fixed mortgage.

 

With so many loan options today and varying interest rates why is it that the 30 year fixed rate mortgage is still the best option even for the financially savvy? 

1.  Due to the longer amortization schedule, you have the lowest possible payments without concern of them changing as would be the case with an adjustable rate loan or interest only option, etc.  The lower payments provide for greater cash flow which allows you to invest your money in other areas such as investment vehicles that can earn a greater return than the current mortgage rates.
2. Mortgage interest is tax deductible; therefore a longer term mortgage provides greater tax shelter than a shorter-term mortgage at a lower rate.
3. Inflation is on the horizon and a 30-year loan is your best protection against that inflation.  If inflation were to occur at a high rate, you would have fixed debt at a low rate with money market rates at higher rates thereby allowing you to repay your loan at a fraction of your earnings.  If inflation does not occur, you are still in a position to allow higher investment vehicles to flourish with the cash flow saved.  If rates drop, we just refinance again.

Every individual family has different needs, goals, and investment strategies.  There is no single solution for everyone and therefore the most important part of obtaining your loan is  understanding all of your options to guide you through your financial future. 

Emmanuel St.Germain can be reached at 561 362-8204 or at Emmanuel@choicemtgbankers.com . Please visit www.choicemtgbank.com for more information.