Four Reasons to Consider a 20-Year Mortgage Vs. a 30-Year Mortgage

Published On:
January 28, 2022

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When people think of mortgages, they often think of a 30-year term mortgage. Although 30-year mortgages do tend to be the most common among buyers, there are many options to consider in the home buying process. One of these options is a 20-year mortgage; a 20-year mortgage often has a slightly lower interest rate and is paid off over a shorter amount of time. Continue reading for four reasons a 20-year mortgage may be the right option for you.

1. Save on interest.

There are two main ways you can save on interest with a 20-year mortgage. First, 20-year interest rates are generally lower than 30-year rates by .20-.40% APR*. Even if your rate is the same, a 20-year loan could save you thousands of dollars in interest just by shortening the life of your loan. That’s because your loan will have less time to accrue interest.

2. Pay off the loan and build equity faster.

One of the other considerable benefits of a 20-year loan is building equity faster. Since your monthly payments will be slightly higher, your loan will be paid off over a shorter time period, and the equity in your home will build faster. You can then use that equity to open a HELOC and use that earned equity on home renovations and more! You may also get to stop making house payments and have full ownership of your home ten years sooner.

If you are looking to refinance, a 20-year mortgage can help you stay on track with your payoff goals, so you don’t lose any progress you’ve already made. Sometimes when you refinance and keep a 30-year loan, you can save money monthly but end up paying more in interest. Refinancing to another 30-year also adds more time to your original payoff date, where choosing a 20-year can help you pay off your loan around the same time as your previous 30-year would end. Depending on how much of your loan you’ve already paid, you can even get rid of private mortgage insurance (PMI) payments.

3. Affordable payments.

With a 20-year mortgage, payments are only slightly larger than a 30-year mortgage, but still affordable. Calculate your payment or use our quick mortgage quote to compare the payments of a 20 and 30 year mortgage. If you are refinancing, payments are sometimes lower or around the same as your previous loan.If you find you have the extra money in your budget, you can make extra payments and pay off your loan even sooner.

4. Consistent payments.

Since Arbor Financial Credit Union offers a fixed-rate 20-year mortgage option, you know exactly how much per month you will pay for the life of your loan, giving you consistent payments and more ease with budgeting. When calculating your budget, don’t forget to factor in property taxes and homeowners insurance.

These are just four reasons why a 20-year mortgage may be perfect for your financial situation, but there are many more! If you would like to learn more about Arbor Financial’s 20-year mortgage product and how it may help you, talk to one of our talented mortgage specialists today!

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* Rates are determined by your credit score and underwriting factors at time of application. Subject to credit approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions may apply. For full details, click here.


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Home Ownership , Lending