In the aftermath of the great Recession, there was a flight to the "security" of the 30 year fixed rate loan. But, how many people do you know who have had the same mortgage loan for 30 years? Hmmmm...my parents did. They never moved from their original home, and they remodeled utilizing cash on hand. But, in today's world, we rarely see people who have lived in the same home for 30 years, and even if they have, they have refinanced at one time or another for alternate purposes such as an addition, remodel, debt consolidation etc.
I personally can't think of anyone today who has had the same loan for that long. So, why the tendency to go for a 30 year fixed rate loan? Today there are far more attractive rates for 7- or 10-year ARM loans vs. a 30 year fixed rate loan. An ARM loan is still a 30 year amortizing loan, but the rate is only "fixed" for the initial period. After that, it adjusts on a fixed schedule, usually annually, over an index such as LIBOR or Treasuries.
There are reasons to use a 30 year fixed rate. A rental property might be a good candidate for a 30 year fixed rate loan. But, why pay a higher interest rate for a 30 year loan when you likely won't hold the loan for more than seven to ten years? Prior to the recession of 2008, the average hold time for a home in California was six years. Post-recession it extended to nine years, mostly due to the fact that many homeowners were "under water" and owed more than their home was worth. However, this is certainly not the case today.
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