20 Year Fixed Mortgage Rates

Compare today's current mortgage and refinance 20 year fixed interest rates.

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When people mention obtaining a mortgage, the first mortgage length that comes to mind is 30 years. Since the 1960’s, the 30-year fixed mortgage has been the loan product of choice for most U.S. home buyers. However, what if you knew you could pay off your home loan faster with only a slightly higher monthly payment plus a better interest as well? Now you might re-think the idea of a 20-year mortgage! Out shadowed and sandwiched between the more popular 30- and 15-year fixed mortgages, this is a real sleeper of a loan product which should not be overlooked!

What is a 20 year fixed-rate mortgage?

The 20 year fixed-rate mortgage is a home loan which maintains the same interest rate and monthly payment for the life of the loan. For borrowers who can easily manage the monthly payments on a 30-year mortgage and might consider making additional payments, this is an excellent compromise. The additional money paid in monthly payments isn’t that significant, but the savings in interest at the end of the loan is!

How does a 20 year fixed mortgage work?

Only slightly shorter than the popular 30-year mortgage, the 20-year fixed mortgage provides a set  payment (usually monthly) for the lifetime of the loan. The interest rate is locked in at the time you obtain the mortgage, and cannot increase (or decrease), no matter the change in rates offered by lenders later. A less popular option, not all lenders offer a 20-year mortgage loan.

Important interest rate factors:

Even though the 20-year fixed-rate mortgage offers better interest rates than the 30-year mortgage, you must keep in mind important financial factors driving all mortgages:

  • FICO score. Your personal financial “reputation” is reflected in your FICO score. A rating of 700+ is considered a good score.
  • Mortgage use. Typically refinance mortgages are slightly higher than purchases.
  • Property Use. Lenders are eager to offer the best rates for primary homes, with higher interest rates for second homes and rental properties.
  • LTV (loan-to-value) Ratio. When borrowing a higher percentage of the home’s purchase price or value, the interest rate is generally higher (banks see you as a higher risk).
  • Jumbo vs. Conforming Loans. Jumbo loans exceed the conforming lending limits set by the federal government. Only the highest qualified borrowers are eligible for a Jumbo loan.
  • Location. Local economic factors can affect mortgage interest rates. A stronger economy means a stable real estate market and lower interest rates, where a less stable economy and real estate market could equate to a higher risk for foreclosure and thus, higher interest rates.
  • Buydown. When borrowers put money down up front to lower the interest rate, they can save thousands of dollars. This option isn’t always the best choice and one to discuss with your lender.

The proof is in the details – Interest rate vs. APR (there is a difference):

You will see these terms and may believe they are the same, used interchangeably. But the truth is that they are different, and that difference adds up to additional dollars out of a borrower’s pocket.

  • Interest Rate. This is the percentage you may to borrow money from your lender, paid in installments over the set life of the loan. At the end of your loan (whether you pay it off at the maturity or at any point during the loan), you will pay the principal (the amount you borrowed) and the interest which has accumulated. As you pay your principal balance down, the amount of the payment which is principal and interest is skewed, allowing you to pay more towards your principal with each payment, called mortgage amortization.
  • APR (annual percentage rate). This reflects the interest rate (see above) plus the fees and expenses which come with your loan, like private mortgage insurance, any prepaid interest, or other fees you paid to the lender which are rolled into this amount. This number, therefore, will be slightly higher, and is a more accurate rate of the interest you pay. Law requires your lender to provide this information on both your loan estimate and your closing disclosure.

Is a 20-year fixed rate mortgage right for you?

Pros:

Saves money in interest. You will find a better interest rate when compared to the 30-year fixed, seeing a .25% to .5% reduction. Combined with paying your mortgage off 10 years earlier, this is a sizable chunk of change saved.

Stable monthly payments. The 20-year fixed mortgage gives you a set rate for 20-years, insulating you from volatile interest rate changes.

Own your home faster. Simply put, you will be mortgage-free 10 years sooner than most home buyers.

Cons:

Higher monthly payments. Although the difference is less than 25%, some buyers are on a tight budget and can’t manage the higher monthly obligation.

Less financial flexibility. Higher payments mean less cash is available for emergencies. You should pencil the numbers to decide if you can make that work with your budget.

May not give enough advantage over the 15-year mortgage. Although the rates are lower and the interest savings are measurable, the more popular 15-year fixed mortgage may end up saving you more than the 20-year mortgage.

A typical 20-year fixed mortgage consumer

The 20-year fixed mortgage consumer is looking for a longer term loan but doesn’t mind spending just a little bit more each month. He or she has a larger buffer in the budget and can balance unforeseen expenses with the slightly higher monthly payment. This home buyer is looking to save 10 years and thousands of dollars in interest. Like with any loan product, it is important to shop around and compare lenders, including their closing costs and fees, to ensure you get the most competitive terms and rate.

20-year fixed mortgage rates change daily and are determined by 5 major driving factors which you can control: Property type and use, loan-to-value ratio, your FICO score, and whether you are purchasing or refinancing the mortgage.

Getting the lowest 20-year fixed jumbo refinance rate depends on 4 main elements: the refinance type (rate/term or cash out), the amount of equity you have in the property, any second mortgages, liens or subordinate financing you already have, and your financial report card.

Jumbo (loan amount >$548,250) 20-year fixed rates are typically higher than conforming loans. This process should also include comparing loan estimates, having a 740+ FICO score, 60% (or less) loan-to-value, and the property being your primary residence.

Conforming (loan amount <$548,250) 20-year fixed rates are typically lower than jumbo loans. This process should also include comparing loan estimates, having a 740+ FICO score, 60% (or less) loan-to-value, and the property being your primary residence.

The 20-year fixed rate offers a balance of payment and length for purchasers who may have a larger down payment or feel they can handle a slightly higher monthly payment. This term is not uncommon for those looking at their first refinance opportunity. The 20-year difference can save thousands in interest with a slightly better interest rate, although your monthly payment may be (on average) $200-$500 more.

Get started with a purchase or refinance mortgage loan today!

Get started with a purchase or refinance mortgage loan today!

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