20-Year Mortgage Rates

With current interest rates at historic lows, people all across the country are looking into purchasing or refinancing a home. While there are a number of different decisions to make in the process, the length of your mortgage is a major choice at the top of the list. So which will it be? A 15-year term? 30-year? 20-year? Which option is best for you? 

If you’re looking for a nice blend of savings and affordable payments, you may want to look at the current 20-year mortgage rates. Before you do, though, you’ll want to understand how this loan stacks up against the more common options available. When you weight these loans against the others, you may see a wide range of monthly payments and savings or more total costs.

In this article

    Current 20-year mortgage rates

    According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current refinance average rates for a 30-year, 15-year fixed and 5/1 adjustable-rate mortgage (ARM) refinance rates among others.

    Product Interest Rate APR
    30-Year Fixed Rate3.050%3.260%
    30-Year FHA Rate2.630%3.520%
    30-Year VA Rate2.710%2.910%
    30-Year Jumbo Rate3.070%3.180%
    20-Year Fixed Rate2.910%3.090%
    15-Year Fixed Rate2.340%2.620%
    15-Year Fixed Jumbo Rate2.360%2.430%
    5/1 ARM Rate2.790%3.920%
    7/1 ARM Rate3.020%3.740%
    7/1 ARM Jumbo Rate3.280%3.570%
    10/1 ARM Rate3.290%3.940%

    Rates data as of 9/21/2021

    What is a 20-year fixed mortgage rate?

    A 20-year fixed mortgage is a type of home loan that is repaid over 20 years. Your 20-year fixed mortgage rate is the cost of borrowing. In other words, it’s the extra money you pay to the lender in exchange for borrowing the funds to buy the house. It’s a large part of how the lender makes its money.

    When it comes to shopping for new home rates or mortgage refinance rates, a 20-year loan is an often overlooked option. Most people are aware that you can get a shorter 15-year mortgage or a longer 30-year mortgage. But while your bank or lender might not have rates on 20-year loans listed on its website, the option is generally available if you ask.

    [ Read more: 6 Ways to Make Your Mortgage Application Easier ]

    In comparison to the 20-year option, the 15-year loan is great for people who are fine with a higher payment and want to save on the overall cost of the loan. Because you have the loan for a shorter period, the risk to the lender is lower, which allows the lender to offer you a better and more attractive interest rate.

    The 30-year option is ideal for people who are willing to spend a little extra over the life of the loan in exchange for smaller monthly payments. The lender has to float the money for much longer, so there’s more risk. This means that the lender may charge you a slightly higher rate to compensate for the added risk.

    The other option, which is a 20-year mortgage, is a happy medium between the two. You’ll save on total interest costs versus a 30-year loan, but your monthly payments won’t be as large as they would be with a 15-year loan. Depending on your financial goals with your home purchase or mortgage refinancing, it could be an ideal option to consider.

    What are the differences between interest rates and APRs?

    If this is the first time you’re purchasing a home, or it’s been a long time since you went through the whole song and dance, you may need a refresher on the difference between interest rates and APR. Your interest rate is the percentage cost of borrowing for your loan. This is the extra amount you pay to the lender in exchange for getting your money upfront.

    While the interest rate does give you a pretty good idea of your cost of borrowing, it’s not the whole picture. You’ll still owe additional fees as a part of the process. The metric that takes into account your true total cost of borrowing (including the interest rate and fees) is your annual percentage rate (APR). This figure shows you exactly what the annual cost of your home loan.

    Not all mortgages have the same fees or additional costs of borrowing, though. If they do, you can compare by interest rate alone and get a good idea of which loan option is best. However, when the loan options have different fees, comparing on interest rate alone is like comparing apples to oranges. The APR converts both rates into a metric that can be compared while accounting for the different loan terms.

    Is a 20-year fixed-rate mortgage better than a 30-year fixed-rate mortgage?

    The answer to this question depends on your situation, what you can afford and what your long-term financial goals may be. It also depends on the lender. If you’re looking at it strictly based on the interest rate or APR, you’ll often be able to get a lower rate on the shorter 20-year loan. This is because the overall risk to the lender should be lower. 

    However, whether that’s the best option for you depends on your situation. You’re spreading out the cost of your loan over a shorter period with a 20-year mortgage, so in turn, your payments will be higher. If you’re already purchasing a home toward the top of your price range, this might not be ideal. If you’re purchasing below your max budget, you may be able to set yourself up to pay off your house and build equity much quicker.

    [ More: A First-Time Homebuying Guide ]

    Remember, though, that if you do opt for the higher payments, you have to make those payments the entire length of the loan. If you’re worried about being able to keep up down the road, it could be a safer move to opt for the longer 30-year mortgage.

    Here are a few questions you can ask yourself to figure out which loan option might be best for you.

    • What is the maximum payment size I am comfortable making?
    • How steady is my income? If it’s unsteady, will I be able to manage the higher payments down the road?
    • What are my financial goals? Am I okay spending a little more in total in exchange for lower monthly payments?
    • How big are the savings between the two options? Have I compared actual rates instead of just assuming that one is better than the other?
    • Have I calculated all additional expenses into my budget plan to accommodate for higher payments? Have I looked at things like homeowner’s insurance, private mortgage insurance and any other one-off fees?

    The best way to answer the question of whether a 20-year or 30-year mortgage is best for you is to start by answering these questions. From there, shop lenders and ask for rates and calculations for each option. You may need to use online calculators to figure out things like the total cost of the loan. Once you have all this information, you’re much better equipped to make an informed decision.

    Neither loan option is better in general. The answer depends 100% on the unique factors of your financial situation.

    For example, let’s say you’re looking to purchase a $250,000 home and your lender gives you the option of a 20- or 30-year loan. For the sake of the example, assume the lender gives you the same rate of 3.50% on both loans. All other fees are assumed constant and not included in the example.

    [ Related: How Much House Can I Afford? ]

    If you opt for a 30-year loan, your monthly payment would be $1,123, and your total mortgage cost would be $404,140.

    If you opt for a 20-year loan, your monthly payment would be $1,450, and your total mortgage cost would be $347,976.

    As you can see, the longer-term loan saves you over $300 a month. But in return, you’re spending an additional $50,000 + over the life of the loan.

    What are the benefits and downsides to a 20-year mortgage?

    The biggest benefit of a 20-year mortgage compared with a longer-term option is interest savings. Because you’re not borrowing the money for as long of a period, you’re going to save extensively on the interest costs. The effects of this might not seem like much when you look at things on a monthly scale, but when you extrapolate out the difference in costs over several decades, it becomes more pronounced.

    Another benefit of a 20-year mortgage is that the shorter-term loan helps you to build equity faster. In other words, the loan gets you to complete ownership of your home much sooner.

    And while that might not seem like a huge deal now, imagine the feeling 20 years from now. If you opted for the shorter-term loan, you’d no longer have to make mortgage payments after 20 years. However, if you took the longer-term loan, you’d still have 10 years of payments left until you own your home outright.

    While these benefits are great, they do come at a higher monthly cost. If you opt for a shorter-term mortgage loan, your monthly payments will be higher. Even though the rate may be better, you’re still paying off the principal in a shorter period. With a 20-year loan, you’re making 240 monthly payments. With a 30-year loan, it’s 360 payments.

    [ Read: Tips for Getting a Mortgage ]

    Depending on your financial situation, this could be a significant downside. Remember, you have to sustain the higher payments for the entire life of the loan. While you might currently have some extra cash to be able to handle it, will you still have that ability five or 10 years from now? 

    Ultimately, the decision comes down to total costs over the life of the loan versus monthly costs. Shorter-term loans will cost more in the short term but save you thousands in the long run. Longer-term loans will have lower monthly costs but are more expensive when you add up the total costs for the life of the loan.

    If you’re wanting to take advantage of the savings but don’t want to lock yourself into the shorter-term loan, you could always take the longer-term loan and make pre-payments. As long as your loan doesn’t penalize you for paying things off early, you could effectively treat your loan as a 20-year loan, even though it’s set up for 30 years.

    Keep in mind that you’ll still probably have a slightly higher interest rate, but that’s not always the case. Additionally, people are much more likely to make higher payments when they’re required to. If you don’t have a lot of financial discipline, you may find yourself skipping some of the extra payments.

    Fees to consider with a 20-year mortgage loan

    Your 20-year mortgage loan comes with the same fees as any other length mortgage. This includes all of the standard closing costs, whether you’re refinancing or purchasing a new home. You must include any fees in your calculations to protect yourself from any surprises during the closing process or after you acquire the loan.

    That’s one of the main reasons that many homeowners look at the APR instead of just the interest rate when shopping for their loans. It helps to include a lot of these additional fees into the equation for easier comparison.

    It’s also smart to take the time to figure out the total cost of your loan from start to finish. Calculate in all of the upfront fees, recurring fees and the cost of all of your payments. When you do this, you may be surprised to see the difference in cost between many of the options. Still, you may need to opt for the longer-term loan if the payment size on the shorter loan is too high to sustain.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Jason Lee

    Contributing Writer

    Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here

    Reviewed by

    • Angelica Leicht
      Angelica Leicht
      Mortgage Editor

      Angelica Leicht is an editor at The Simple Dollar who specializes in mortgages, mortgage refinancing, home equity loans, and HELOCs. She is a former contributing editor to Interest.com and PersonalLoans.org.