20-Year Fixed Mortgage Rates

A 20-year mortgage can be a good option for certain homebuyers. Here’s a look at its pros, cons, and the rates you can expect.

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Find out about 20-year mortgage rates to determine whether this loan term makes sense for your situation. (Shutterstock)

While a 30-year mortgage is the most popular option, a  20-year mortgage can be a good compromise between the lower monthly payments of a 30-year mortgage and lower interest rates of a 15-year mortgage. Here’s what you need to know about 20-year mortgage rates and terms.

If you’re thinking about a 20-year mortgage, Credible lets you easily compare prequalified mortgage rates in minutes.

Today’s 20-year mortgage rate trends

Here’s how mortgage rates have been trending over the past 12 months.

Historical mortgage rates

Here’s what the average annual mortgage interest rate has looked like for the past 39 years. 

How Credible mortgage rates are calculated

Changing economic conditions, central bank policy decisions, investor sentiment, and other factors influence the movement of mortgage rates. Credible average mortgage rates and mortgage refinance rates are calculated based on information provided by partner lenders who pay compensation to Credible.

The rates assume a borrower has a 740 credit score and is borrowing a conventional loan for a single-family home that will be their primary residence. The rates also assume no (or very low) discount points and a down payment of 20%.

Credible mortgage rates will only give you an idea of current average rates. The rate you receive can vary based on a number of factors.

Credible makes it easy to compare mortgage rates, without affecting your credit score.

Pros of a 20-year mortgage

The most noteworthy benefits of a 20-year mortgage loan include:

  • Save on interest. Compared to a 30-year mortgage, a 20-year mortgage offers a lower interest rate. This can save you thousands of dollars over the life of your loan term.
  • Build equity faster. While you’ll have higher monthly payments with a 20-year mortgage than a 30-year mortgage, you’ll be able to build your home’s equity faster. Plus, if you have private mortgage insurance (PMI), you might be able to get rid of it sooner.
  • Pay off your home quicker. The greatest perk of a 20-year term over a 30-year mortgage is that you’ll own your home free and clear 10 years sooner. This can give you some much-needed peace of mind.

Cons of a 20-year mortgage

A 20-year mortgage may also come with drawbacks, such as:

  • Make higher monthly payments. Since you’ll have a shorter term than you would with a 30-year mortgage, your monthly payments will be higher. If you have a tight budget or unstable job, this can be an issue.
  • Have less cash on hand. Larger monthly payments may lead to cash flow issues. You’ll have less money to cover additional living expenses, pay off debt, save for retirement, and meet other financial goals.
  • Pay more in interest compared to shorter terms. With a 20-year mortgage, you’ll save on interest compared to a 30-year mortgage, but you’ll be paying more interest than you would with a shorter term (like a 15-year loan).

Find the right mortgage for you

Before you take out a mortgage, follow these steps:

  1. Check your credit. Since lenders will check your credit when you apply for a mortgage, it’s important to know where you stand. Visit AnnualCreditReport.com to pull free copies of your credit reports from Equifax, Experian, and TransUnion. If you notice any errors or inaccuracies, be sure to dispute them.
  2. Figure out what you can afford. A good rule of thumb is to spend no more than 28% of your pre-tax income on your mortgage payment, including property taxes and homeowners insurance. Of course, what you can afford and what you feel comfortable with may be different. Take the time to think about what kind of mortgage payment will work best for your budget, lifestyle, and goals.
  3. Get prequalified. Even if you think you can afford a specific loan amount, there’s no guarantee a lender will approve you for it. By prequalifying, you’ll get an estimate of how much a lender may lend you. Once you share some details on your income, assets, and debts, you’ll know how much you may qualify for when you look for a mortgage.
  4. Shop around and compare mortgages. Not all home loans are created equal. That’s why it makes sense to shop around and find out what’s available to you. Compare the interest rates, terms, and fees for all your options.

How to get a good 20-year fixed rate

When lenders review your mortgage application to determine your interest rate, they consider the following factors:

  • Down payment — A down payment is a percentage of your home’s purchase price that you pay upfront. The more money you put down, the less you’ll have to borrow. If you make a down payment of 20% or more, you may be more likely to qualify for a good fixed rate on a 20-year home loan, since lenders won’t have to loan you as much money. Usually, you can also avoid paying PMI with a down payment of 20% or more.
  • Credit score — Your credit score is a three-digit number that gives lenders an idea of how likely you are to repay your loan. The higher your credit score, the less of a risk you are as a borrower, so you can qualify for better fixed interest rates.
  • Debt-to-income (DTI) ratio — Lenders also consider your DTI ratio, which is a calculation of all your monthly debt payments divided by your gross monthly income. While every lender has its own requirements, most look for a DTI of no more than 43%. Generally, the lower your DTI the better.

What credit score do you need to get a good 20-year mortgage rate?

Your credit score ranges from 300 to 850. The higher it is, the greater your chances of getting a good 20-year mortgage rate. FICO rates credit scores this way: 

  • 300 to 579 — Poor
  • 580 to 669 Fair
  • 670 to 739 — Good
  • 740 to 799 Very good
  • 800 to 850 Exceptional

With a good, very good, or exceptional credit score, you’ll likely qualify for the best rates on a 20-year home loan. If you choose a conventional loan, you’ll generally need a score of 620 or higher. A lower credit score might be acceptable if you opt for a government-backed loan, like an FHA loan, VA loan, or USDA loan.

Is a 20-year fixed mortgage a good deal?

A 20-year fixed mortgage may be a solid choice if you can comfortably afford a higher monthly payment than you’d have with a 30-year mortgage. This might be because you have a lot of cash left over at the end of every month or you feel stable in your career. 

A 20-year loan might also make sense if paying off your home faster is a financial priority. In addition, it’s worth considering if you want to reduce your mortgage interest but can’t afford the monthly payments on a 15-year loan.

If you’re ready to purchase a home, use Credible to compare mortgage rates from multiple lenders, all in one place.

Should you get a fixed-rate mortgage or a variable-rate mortgage?

The most common type of mortgage is a fixed-rate mortgage, where your interest rate stays the same over the life of the loan. Since the amount you pay doesn’t vary, it’s ideal if you’re on a fixed income, have an inflexible budget, or plan to stay in your home for a while. It can also give you some peace of mind if you have a low risk tolerance. You’ll be able to plan for your mortgage payments in advance and won’t have to worry about any unexpected increases. 

On the other hand, a variable-rate mortgage, also known as an adjustable-rate mortgage, or ARM, comes with an interest rate that fluctuates. The rate is fixed for several years, and it may start at a lower rate than those for fixed-rate mortgages. Then, it will adjust up or down as market rates change. You may consider a variable-rate mortgage if you don’t plan to live in your home for very long.