Potential Cost Savings Benefits of a 20 Year Mortgage
People typically consider a 20 year mortgage for one of two reasons. The most prominent being the desire to pay off their mortgage faster than they would with a conventional 30 year fixed rate product. Other consumers opt for 20 year home loans to give themselves a little more of a payment cushion than they have with a 10 or 15 year mortgage. During months where money may be a little tight, the borrower would have the ability to simply make their 20 year payment. In months where more resources are available, the consumer could then apply additional payments towards paying down the principal balanced owed. Are there some risks that comes with a 20 year fixed rate mortgage? Sure, there are risks with all mortgage programs. If a borrower feels like they may have a difficult time making a 20 year payment, they may want to consider a 30 year mortgage and make additional curtailment payments whenever funds may be available (always, always, always make sure your loan’s servicer knows to apply the extra funds towards the principal.
Whatever your reason for considering a 20 year mortgage, you can find mortgage companies eager to compete for you business on this web site.
Check Current 20 year mortgage rates and closing costs online >
How Much Can You Save with a 20 Year Mortgage?
Let’s take a look at an example below. You’ll want to crunch the numbers on your specific scenario.
20 Year Fixed Rate Mortgage
$300,000 Loan Amount
Note Rate of 4.375%
Monthly Principal and Interest Payment: $1,877.77
Estimated Interest Paid Over 20 Years: $150,663.78
Interest Saved Vs. 30 Year Home Mortgage = $96.556.22
30 Year Fixed Rate Mortgage
$300,000 Loan Amount
Note Rate of 4.500%
Monthly Principal and Interest Payment: $1,520.06
Estimated Interest Paid Over 30Years: $247,220.13
The example below is for illustrative purposes only and does not reflect current pricing from the lenders and brokers listed on this web site. Always be sure to consult with a licensed mortgage and tax professional before making any major financial decision.
