20-Year Mortgage Loan Rates: Cutting Corners
Before you take a mortgage loan, ask yourself “how much can I afford each month?” In order to increase your savings look for the lowest interest rate over the shortest term. Many first time purchasers look to take larger loans with a 30-year FRM (fixed rate mortgage). Refinance borrowers often look for lower term mortgages and with low interest rates look for 15-year FRM.
If you can afford the payments, then a 20-year mortgage loan offers a compromise between a 30-year FRM and a 15-year FRM. A 15-year FRM is cheaper, but maybe not affordable. If you can pay more than the 30-year FRM, then consider the 20-year FRM. Even if the interest rate is only marginally cheaper, you will save money by paying off your loan quicker.
In order to help you decide whether a 20-year mortgage loan is right for you, learn to: •
- Compare interest rates and fees
- Compare payments
- Shop around
20-Year Mortgage Rates: Compare Interest Rates and Fees
Interest rates are constantly changing, so make sure that you updated your research before shopping for your mortgage. Make sure that you compare mortgage rates and mortgage fees.
Mortgage fees come in different forms including:
- Lender Fees: application fees, legal fees, origination fees and discount points.
- 3rd Party Fees: title insurance, appraisal fees
- Escrow Fees: property insurance, homeowners association fees, property tax
Often times you will be quoted an interest rate based on an APR (annual percentage rate) which was designed to give a comparison rate, using the interest rate and the upfront fees. Unfortunately, this rate is not dependable, because of these reasons:
- Not all fees are included in most banks offers.
- Most borrowers do not carry the loan the full period. Therefore, higher initial fees are discounted over a longer period of time, which lowers the APR.
- It is difficult to calculate the APR for an Adjustable Rate Mortgage, due to the fluctuation in the interest rate.
- Lenders do not uniformly use the effective (compounded) interest rate.
20-Year Mortgage Rates: Compare Payments
Interest rates for longer period loans are generally more than shorter period mortgage rates, although sometimes a 20-year mortgage rate is very similar to a 30-year mortgage rate. In order to help you compare how interest rates affect your monthly payment check out the table below, which shows monthly payments based on a $250,000 loan:
|Nominal Interest Rate||15-Year FRM||20-Year FRM||30-Year Frm|
If you were to take a 15-year loan at 2.75%, your payments would be $1,696.55. Assuming a 0.5% interest increase for a 20-year loan at 3.25% your payment would be $1,417.99 and a 30-year FRM at 3.75% only $1,157.79.
Verify your DTI (debt to income) ratio, which is your monthly housing and debt payments divided by your monthly income. DTI requirements vary depending on the type of loan and a lender’s underwriting requirements. Best rates for a conventional loan are available if your DTI is under 36%. Therefore, even if you feel that you can manage a higher monthly payment, the lender may offer higher interest rates or not approve a shorter period loan.
20-year mortgage rates: shop around
prepare yourself to qualify for the best mortgage rates by following these guidelines:
- monitor and improve your credit score
- prepare your budget and monitor your debt to income ratio. lower your overall debt.
- shop around for 20-year mortgage rates and other types of mortgage interest rates. keep in mind the time horizon you want to hold on the loan and the upfront fees the lender charges.
finding mortgage interest rates is now easier than ever. you can look online at a number of lender sites as well as through online comparison sites.
bills.com offers a mortgage rate table to help you see today’s mortgage rates. the table shows you the rates for the most common loans, including a 30-year, 20-year and 15-year frm as well as a 5/1 and a 7/1 arm.
Use the mortgage rate table “customize” button to receive an offer based on your loan type (purchase or refinance), credit score, house value, loan amount and zip code.