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20-year vs. 30-year mortgage: Which is best for you?

Higher monthly payments vs. higher interest

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Written by Bradley Schnitzer
Edited by Cassidy McCants
couple meeting with mortgage lender to look at paperwork

One of the biggest decisions many homebuyers face is whether to get a longer-term mortgage in order to spread out their payments or to condense their repayment term with, for example, a 20-year mortgage.

Both mortgage options have their pros and cons, making them suited to different types of borrowers. Ultimately, it often depends on how much you can afford monthly — but there are other factors to consider.

20-year mortgage pros and cons

With any mortgage option, you’ll find some benefits and drawbacks. The main benefit of choosing a shorter term length is paying less interest over the loan period. However, there is a trade-off: a higher monthly payment.

Pros

  • Shorter repayment period: You pay your mortgage off a decade earlier than you would with a 30-year mortgage.
  • Faster-building equity: You build equity faster with a 20-year loan, which means you can leverage your home’s value sooner.
  • Lower interest rate: Shorter the repayment terms typically come with lower interest rates. You could save tens of thousands of dollars on interest with a 20-year mortgage.

Cons

  • Higher monthly payments: Your payments on a 20-year mortgage will be higher because you’re squeezing the same loan amount into a shorter repayment period.
  • Less house affordability: Choosing a 20-year mortgage may limit the maximum property price you can afford. If you’re limited financially but are looking for a more expensive home, a 20-year mortgage might not be the right choice.
  • Less financial flexibility: The more money that goes toward your mortgage payment, the less you have to put toward other purposes, like investing for retirement or saving for a child’s education. If you end up needing the money that’s tied to your home, you might need to take out a home equity loan or line of credit, which tends to have a higher interest rate than a mortgage.

30-year mortgage pros and cons

30-year mortgages are a typical choice for homebuyers; for those who can’t afford a higher monthly payment, these longer terms can make homeownership a reality. But there are some downsides.

Pros

  • Lower monthly payments: Thirty-year mortgages spread the same principal amount over a longer period of time, leading to lower monthly payments. This can increase your monthly cash flow and allow you to save and invest more money.
  • More common: Thirty-year mortgages are the easiest to find because it's such a popular mortgage term.
  • More home affordability: Because the repayment is spread out over a longer term, it makes it easier to purchase a higher-priced home while staying within your budget.

Cons

  • Longer repayment period: With a 30-year mortgage, you make loan payments for a longer time. A 10-year longer repayment term equates to 120 more monthly payments to the lender.
  • Slower-building equity: Since less of each monthly payment is going toward the principal of the loan, you won’t build equity as fast on a 30-year mortgage. If you put down less than 20% on a down payment, it will take longer to get rid of private mortgage insurance.
  • More interest: Thirty-year mortgages may offer lower monthly payments, but they usually have higher interest rates, and you end up paying a significant amount more in interest charges over the life of the loan.

Current mortgage rates

Rates are effective 12/08/2022 and are subject to change without notice. APR shown is provided by a partner of ConsumerAffairs.

ProductAPR
6.431%-0.07%Get Rates

The APR shown of 6.431% is available for a 30-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

6.01%0.0%Get Rates

The APR shown of 6.010% is available for a 20-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

6.44%0.03%Get Rates

The APR shown of 6.440% is available for a 30-year FHA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

6.59%0.0%Get Rates

The APR shown of 6.590% is available for a 20-year FHA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

5.749%0.0%Get Rates

The APR shown of 5.749% is available for a 30-year VA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

5.785%0.0%Get Rates

The APR shown of 5.785% is available for a 20-year VA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.


Current refinance rates


ProductAPR
6.488%0.0%Get Rates

The APR shown of 6.488% is available for a 30-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

6.114%0.0%Get Rates

The APR shown of 6.114% is available for a 20-year fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

6.626%0.0%Get Rates

The APR shown of 6.626% is available for a 30-year FHA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

5.552%0.0%Get Rates

The APR shown of 5.552% is available for a 20-year FHA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

5.824%0.0%Get Rates

The APR shown of 5.824% is available for a 30-year VA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

5.92%0.0%Get Rates

The APR shown of 5.920% is available for a 20-year VA fixed rate loan in the amount of $200,000 for consumers with loan-to-value of at least 80%.

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Help me Decide

15-year vs. 20-year mortgage

A 15-year mortgage has many of the same benefits over a 20-year mortgage that a 20-year mortgage has over a 30-year one. It should come with an even lower interest rate and help you build equity in your home faster.

On the other hand, the monthly payments on a 15-year mortgage will be higher than on a 20-year loan. Overall, 15-year mortgages (or 10-year mortgages) are only worth considering if you can afford the higher monthly payments.

Bottom line: Should you get a 20-year or 30-year mortgage?

Each type of mortgage is suited to a different type of borrower. If you want to minimize your monthly payments and have more cash on hand to invest elsewhere, a 30-year mortgage may be your best choice. This term length tends to work well if you don’t have the monthly cash flow for a higher payment. You may also be able to afford relatively more house. That said, with a longer term, you will have to pay more in interest.

A 20-year mortgage is a better choice if you can comfortably afford the higher monthly payment. You’ll pay less money in interest and gain equity in your home more quickly. Ultimately, it comes down to your monthly budget and financial goals as a homeowner.

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