Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Compare 20-year mortgages

If you have young children or are close to retirement, lower interest rates and shorter terms may be the right fit.

Updated

Fact checked

A 20-year mortgage can save you thousands and help you build home equity faster than you would with a 30-year loan. It has lower interest rates and a shorter pay-off period — but make sure you can afford the higher monthly payments.

How does a 20-year mortgage rate compare to 30- and 15-year mortgages?

A 20-year mortgage is paid off in 20 years and is generally seen as the middle road, with most borrowers opting for a 30- or 15-year mortgage. It’s not as widely advertised, but it does have its perks.

The biggest benefit to a 20-year mortgage is lower interest rates. Typically, you’ll see fixed rates — meaning your interest rates and monthly payments won’t change. Expect rates around half a point lower than a 30-year mortgage, shrinking the total interest over the life of the loan. And you’re not saddled with the high monthly payments of a 15-year mortgage.

Here’s an example of what to expect from a $200,000 mortgage …

Mortgage term Interest rate Monthly payment Total interest paid
15 years 3.8% $1,459 $62,694
20 years 4.0% $1,211 $90,992
30 years 4.5% $1,013 $164,813
Let’s crunch the numbers. Say you’re looking at a $200,000, 20-year, fixed-rate mortgage with an interest rate of 4%. You’ll pay $1,211 per month and cough up a total of $90,992 in interest.

Compare this with a 30-year fixed-rate mortgage at 4.5% — remember, the interest rates are higher for longer terms.

You’ll pay $1,013 each month and a whopping $164,813 in interest over the life of the loan. This doesn’t take into account closing costs like property and transfer taxes, maintenance fees and mortgage insurance. For many borrowers, the amount they save in interest is worth the higher monthly payments — and they get to own their home a full decade earlier.

This is sample data. Your rate will depend on your down payment, as well as your credit score and income. Since the monthly payments are higher than a standard mortgage, it’s harder to qualify for a 20-year mortgage.

Compare more mortgage lenders

Name Product Loan products offered State availability Min. credit score
Better.com
(NMLS #330511)
Better.com
Conventional, Jumbo, FHA, Refinance
Not available in: HI, MA, MN, NV, NH, VT, VA
620
Online preapproval in minutes and no origination fees with this direct lender.
Axos Bank
(NMLS #524995)
Axos Bank
Conventional, Jumbo, FHA, VA, Home Equity/HELOC, Refinance
Available in all states
620
Purchase, refinance, and home equity options available with lender fees as low as $0 (restrictions apply).
LoanDepot
(NMLS #174457)
LoanDepot
Conventional, Jumbo, FHA, VA, Home Equity, Refinance
Available in all states
620
Access a wide range of mortgage and home equity options in person or online with this direct lender.
LendingTree
(NMLS #1136)
LendingTree
Conventional, Jumbo, FHA, VA, USDA, Home Equity, HELOC, Reverse, Refinance
Available in all states
620
Connect with vetted home loan lenders quickly through this online marketplace.
loading

Compare up to 4 providers

Benefits of a 20-year mortgage

A 20-year mortgage offers a few useful benefits for homeowners, including:

  • Lower interest rates. You’ll pay less interest over the life of the loan than with a 30-year mortgage.
  • Build equity quicker. Pay down your balance quicker to give you more equity in your home.
  • Shorter path to home ownership. Keep up with your monthly payments and you’ll be debt free a full decade earlier than those with a traditional 30-year mortgage.
  • Steady payments. With a fixed-rate mortgage, your monthly payment is predictable — not subject to market conditions like with an adjustable-rate mortgage (ARM).

What should I watch out for?

Taking out a 20-year mortgage does have potential pitfalls to be aware of:

  • Higher monthly payment. To use the same $200,000 loan example, you’ll pay nearly $200 more per month than you would for a fixed rate 30-year loan.
  • Harder to qualify for. Eligibility requirements are tighter than for a 30-year mortgage, including a positive credit history and a debt-to-income ratio below 43%.
  • Fewer tax perks. Less interest means a lower mortgage interest deduction.

Is a 20-year mortgage right for me?

With a 20-year mortgage, you’ll pay off your home a decade faster than most borrowers with a traditional 30-year mortgage, and the payments will be lower than a 15-year mortgage. Its flexibility makes it the sweet spot for two particular types of borrowers:

  • Young homebuyers who plan to have children and aim to pay off their mortgage before their kids go to college.
  • People still in the workforce hoping to own their home before they retire.

Either way, you’ll need to be in a good financial situation to take on a 20-year mortgage. If the payments stretch your monthly budget too much or you’re interested in investing your money elsewhere, you might consider a longer term.

Which banks offer 20-year mortgages?

Several banks and credit unions offer 20-year mortgages, though they’re not marketed as aggressively as other terms. They include:

Bottom line

A 20-year mortgage suits those who want to pay off their loan faster without committing to the high monthly payments of a shorter mortgage term. It also puts you in a strong position to refinance if interest rates dip.

Compare your options with our guide to mortgages.

Frequently asked questions

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and finder.com Terms of Use.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site