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Loan Programs
20-Year Fixed Mortgage

 
 
What Is A 20-Year Fixed Mortgage?
 
 
Borrowers have the ability to shorten the term of the traditional 30-Year fixed mortgage by using a 20-Year fixed mortgage. There are several distinct advantages to using a fixed rate mortgage, such as a 20-Year fixed. The obvious benefit is that borrowers can utilize the fixed rate characteristic of the 20-Year fixed, which provides peace of mind in the stability of unchanging mortgage payments for the duration of the loan. However, compared to the traditional 30-Year fixed mortgage, the 20-Year fixed plan allows a shorter payoff period—reduced by exactly 10 years. This allows borrowers to build up equity faster in order to meet other financial goals.
 
 
The main characteristic of a fixed-rate mortgage loan is that the interest rate and the monthly payments for principal and interest are constant for the duration of the loan. This means no changes. No payment shocks. This allows for predictable forecasting of financial obligations—at least in terms of mortgage and housing expenses.
 
 
With a 20-Year fixed, the percentage of the payment each month that is allocated to interest and to the principal balance will shift over time. With time, the allocation of payment will go more towards the principal reduction rather than the interest.
 
 
The one disadvantage to a 20-Year fixed, however, is that the payment will be slightly higher than a 30-Year fixed payment. Borrowers should be certain they can pay the higher payment, and assess possible scenarios which factor in unexpected expenses or even a drop in income. If the capacity to make the payments even in these what-if scenarios is unchanged, then the 20-Year fixed may be a great loan option.

 

 

 

 

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