With a 20-year term, you’ll have 20 years to pay off your new mortgage loan. Although not nearly as common as 15-year and 30-year term loans, a 20-year term can be the happy medium between the two as it offers lower monthly payments than 15-year terms, with a much shorter loan length than a 30-year term. If you can find a lender that has this as an option, 20-year terms can offer the best of both worlds.
Compare the Best Refinance Options
Why Choose a 20-Year Term?
20-year terms are not as widely available as 15 or 30-year terms, but that doesn’t mean they’re at all a lesser choice. In many ways, a 20-year term loan offers the benefits of both a shorter and longer-term loan. By giving homeowners five extra years to pay off their loan as opposed to a 15-year term loan, these usually have lower monthly payments. Similarly, 20-year terms can be paid off faster and for less interest than a 30-year term loan can be.
Whether this type of refinance suits you depends on your current mortgage loan and on your goals. If you presently have a fixed-rate mortgage with either a longer or shorter term, a 20-year term could mean a quicker payoff, less interest, or lower monthly payments, depending on the length of your current loan. For those with an ARM, refinancing into a fixed-rate 20-year term will mean more stability when it comes to interest rates. For many homeowners, a 20-year term offers a comfortable combination of flexibility and stability.
As with any type of refinance, it’s important to do the budgeting and research ahead of time to ensure that you can afford your new 20-year term loan. By reading up on the topic ahead of time, comparing several lenders, and using resources including our refinance calculator, the right term and loan type should come easily.