Overview of the 20-Year Fixed Rate Mortgage
As crazy as it may sound, 20-year fixed rate mortgages aren’t all that popular. The 30-year and the 15-year are the most common ones. However, everyone is different and has different preferences when it comes to payment. With a 15-year loan your monthly payments can be pretty high. With a 30-year loan the interest over the 30 year period can prove to be a deterrent.
And that’s where the 20-year fixed rate mortgage comes in handy. With a 20-year fixed rate mortgage you have 20 years to pay off the loan. And just like with any other mortgage loan, part of your monthly payment goes towards interest and whatever is left goes towards the balance of the loan. Every payment you make results in you owing less interest. As you pay off the interest you will start to pay more on the principle. Eventually you will end up with a zero balance.
And since it is a fixed rate you don’t have to worry about it every changing on you. For many the 20-year loan is the perfect split between the 15-year and the 30-year. Your payments won’t be too high and neither will the interest you pay over the course of the loan. Its a win win situation.
However, there are a few disadvantages that come along with a 20-year fixed rate mortgage. For some it can be considered a big compromise. Yes you will pay less than you would with a 30 year-fixed year mortgage, but on the other hand you will be paying more than you would with a 15-year mortgage. Another disadvantage is that 20-year loans are more difficult to come by.
You have to shop around a little harder. You also have to compare more carefully to ensure you are getting the best possible bill. Generally speaking I have nothing but praise for fixed rate mortgages. In my opinion they are the best option for new homeowners. However, one thing that might give you pause is the fact that your rate won’t automatically adjust should the market go down.
The only way you could get a lower interest rate is if you refinance your home. Most people don’t want to go through the loan process all over again. So who exactly is this type of loan for? A 20-year fixed rate mortgage is perfect for someone who feels they can handle the high payment of a 15-year loan and doesn’t want to deal with the interest of a 30-year loan.
With a 20-year fixed rate loan your payments and your interest will fall somewhere right in the middle. If you are interested in getting a 20 year loan you need to get online a do some shopping around. By using the internet you will have access to more lenders and be able to compare quotes right from the comfort of your home. Once you find a lender you want to go with just contact them and they will be able to give you more information.