How does a 20-year mortgage work?
A 20-year fixed-rate mortgage is an amortized loan that will be paid back fully during that period. Your lender will calculate the principal and interest each month to ensure you're paying back the entirety of your loan. Your monthly payments remain the same.
Your interest rate also remains the same throughout your 20-year term. In many cases, these types of mortgages have lower interest rates than 30-year mortgages. However, they have slightly higher rates than 15-year home loans.
Initially, the majority of each monthly payment will go toward interest. Over time, more will go toward the principal (the amount you actually borrowed).
How to compare 20-year mortgage rates
When comparing mortgages, make sure they all have the same loan term so you can see which one truly offers the best mortgage rates. Also consider a variety of mortgage lenders. These include both local and national banks and credit unions, as well as online lenders. In some cases, seeking the help of a mortgage broker could pay off. Some may offer very competitive rates.
Since applying for a loan might result in a ding to your credit score, find lenders that offer mortgage prequalification. This only involves a "soft" credit inquiry. It won't affect your credit score. When you receive a few quotes, take a look at items such as any loan origination fees, interest rates, closing costs, and mortgage points. (Mortgage points allow you to pay more up front to reduce your interest rate.) Don't forget to look at what you may need to qualify for the best rates. These include a high FICO® Score, a minimum income amount, and a history of on-time payments.
