20-Year Fixed Mortgage Overview
What Is A Fixed Mortgage For 20 Years?
A 20-year fixed-rate mortgage is a home loan with interest that remains the same for the loan duration. The principal and interest of the loan will be due back to the borrower in 20 years. The payments will be the exact same for 20 years, but in the first two years, more of the payment is used to pay interest rather than principal.
Advantages
A fixed interest rate 20-year mortgage offers advantages over an adjustable-rate. One, the rate does not change. This means you will always know the monthly mortgage payment. An adjustable mortgage fluctuates depending on the market interest rate and the loan terms. An ARM's interest rate is generally lower than that of a fixed-rate loan. However, today's low interest rates make the difference between an ARM's initial and fixed-rate mortgages less noticeable.
The 15 years fixed mortgage or the 30 years fixed mortgage is the most commonly used mortgage. The 20-year mortgage offers many benefits over the 30-year loan. One, the 20-year term is much shorter than the 30-year loan. The borrower will likely pay less interest over the course of the loan than with the 30-year loan. Also, 20-year interest rates are generally lower than 30-year interest rates, so you will be out of debt ten times faster if your loan is shorter. Finally, a 20-year term mortgage loan will have lower monthly payments than a 15-year mortgage loan.
Disadvantages
Fixed-rate loans are more expensive than ARMs. If you intend to sell your home within a few years, an adjustable-rate mortgage (ARM) may be the best option. If you are deciding on the length of your loan, you should consider whether a 5-, 10-or 15-year term is more cost-effective. Also, you will pay less in interest and be able to get out faster with one of these loans. A 30-year mortgage is a good option if you have limited cash. Your monthly payments will likely be lower if you are strapped for money.
How To Get The Best Rates
For the best rates on a 20-year fixed-rate loan, shop around for rates and keep an eye on mortgage rate trends. Also, speak to multiple lenders. You should compare different loan offers and not just the interest rate. Also, consider the closing costs.
A higher credit score and a larger down payment could help you obtain a lower interest rate. Lenders will assess your credit score and request past tax returns, pay statements, proof of assets, and financial documents. They will then use this information to determine your ability and willingness to repay.
