What Is a 20-Year Fixed Mortgage?

A 20-year fixed mortgage is a home loan you pay back over 20 years and during that span your interest rate will never change, keeping your monthly principal and interest payments constant. There are a few factors that may impact your mortgage payments, like how interest and principal are applied. Understanding how a 20-year fixed-rate mortgage works and the pros and cons may give you a better idea on whether this home loan option is right for you. 

How does a 20-year mortgage work?

A 20-year mortgage works like other home loans, but you pay it back in monthly installments over 20 years instead of the more common 30 years. This shorter loan term means higher monthly payments but significantly less total interest paid over the life of the loan. With less interest to cover, you’ll build equity faster and own your home outright sooner. Lenders often view 20-year loans as less risky than 30-year loans, so they may come with slightly lower interest rates.

1. Fixed interest rate

Most 20-year mortgages are fixed-rate loans, which lock in your interest rate for the entire term. Your monthly principal and interest payments won’t change, making it easier to plan your budget. Adjustable-rate mortgages (ARMs) are less common for 20-year terms, but if you choose one, your rate could adjust after an initial fixed period.

2. 20-year repayment period

You’ll make consistent monthly payments for 20 years until the loan is fully repaid. This is known as amortization — early payments go mostly toward interest, while later ones go mostly toward the loan’s principal. With a 20-year schedule, you’ll finish paying down your loan 10 years earlier than a standard 30-year fixed mortgage.

3. Higher monthly payments

Because the repayment period is shorter, each monthly payment will be higher than with a 30-year loan. While this requires more room in your budget, it reduces the total cost of borrowing over time.

4. Less total interest

Even with higher monthly payments, a 20-year mortgage saves you money overall. Paying off your loan faster means you’ll spend tens of thousands less in interest compared to a longer-term loan. Use our Amortization Calculator to estimate how much you’ll spend in interest over the 20-year term.

5. Faster equity growth

With more of your payment going toward the principal each month, you’ll build equity more quickly. This gives you more financial flexibility — whether you want to refinance, sell, or borrow against your home in the future.

View the latest mortgage rates offered by us at Zillow Home Loans to get a better sense of what a monthly payment might look like.

Pros and cons of a 20-year mortgage

Pros

A 20-year mortgage can offer an appealing middle ground for many buyers because it offers stability, predictability, and the satisfaction of knowing your home will be yours outright in two decades. These are the advantages that make this loan term attractive to many borrowers.

Predictable monthly payments

Since your interest rate is fixed, your principal and interest payments stay the same for the entire 20-year term. Predictable monthly payments means you can more easily plan for the future, because you know how much money you’ll need to have available to cover your mortgage costs. In contrast, an adjustable-rate mortgage would mean your mortgage payments are more susceptible to market fluctuations that may cause your payments to change over time.

Build equity faster

Because you’re paying off your principal faster than with a 30-year mortgage, you’ll build equity more quickly. You can refinance your mortgage and use the equity in your home fund renovations, consolidate higher-interest debt, or pursue other financial goals. 

Peace of mind

Knowing you’ll own your home free and clear in 20 years can bring a deep sense of accomplishment. That timeline can help you plan for other milestones — like retirement or college tuition.

Cons

While the benefits are attractive, a 20-year mortgage isn’t the perfect fit for everyone. Understanding the trade-offs can help you make a more confident decision.

Higher monthly payments

The biggest drawback is that you’ll pay more each month than you would with a 30-year loan. That higher payment could stretch your budget and limit your ability to save or invest elsewhere.

Less flexibility

Bigger payments mean less room for error in your monthly budget. If your income drops unexpectedly or major expenses arise, you may have less flexibility to adjust without feeling the pinch.

You’ll pay more interest than with a shorter term

If minimizing total interest paid is your top priority, a 15-year fixed mortgage will get you there faster and cheaper because the interest rates are lower than a 20- or 30-year loan. But it comes at the cost of even higher monthly payments, which can be challenging to sustain.

20-year vs. 30-year mortgage

When weighing a 20-year mortgage against a 30-year mortgage, the trade-off comes down to paying less in total interest and building equity faster versus enjoying lower monthly payments. With a 20-year loan, you’ll be debt-free a full decade earlier, but you’ll need to budget for higher payments each month. Here’s an example:

With a principal loan amount of $200,000, a 20-year mortgage is more likely to have a lower interest rate than a 30-year mortgage. The lower rate means you’ll pay less interest over the 20-year term, about $113,486 less in interest compared to a 30-year mortgage. 

However, your monthly payments will be higher with a 20-year mortgage — around $1,502.94 at a 6.6% interest rate — compared to $1,317.20 at a 6.9% interest rate with a 30-year mortgage. 

Use Zillow’s Mortgage Loan Comparison Calculators to compare your options and different loan scenarios.

20-year vs. 15-year mortgage

A 15-year mortgage has an even shorter payoff time and lower total interest cost, but requires significantly higher monthly payments than a 20-year loan. A 20-year mortgage offers a more moderate payment while still helping you pay off your home faster than a 30-year term. Here’s an example:

With a principal loan amount of $200,000, a 15-year mortgage typically offers a lower interest rate than a 20-year mortgage. This lower rate means you’ll pay significantly less in interest over the life of the loan — about $51,053 less compared to the 20-year term.

The tradeoff is higher monthly payments. A 15-year mortgage at 6.3% comes with a monthly payment of about $1,720.30, while a 20-year mortgage at 6.6% lowers that payment to around $1,502.94. Choosing the 15-year option saves you money in the long run, but you’ll need room in your budget for the larger monthly payment.

Is a 20-year fixed mortgage right for me?

Deciding if a 20-year mortgage is right for you depends on your financial situation, goals, and comfort with a higher monthly payment. This type of mortgage works well for buyers who want to own their home faster than 30 years without committing to the steep payments of a 15-year term.

You may consider a 20-year fixed-rate mortgage if you:

• Have stable income and can comfortably afford a higher payment than a 30-year loan
• Want to own your home sooner and build equity faster
• Prefer the predictability of a fixed payment for long-term planning
  

A 20-year fixed mortgage offers a solid middle path — faster payoff and interest savings compared to a 30-year mortgage, but with more manageable payments than a 15-year option. 

If you’re weighing your mortgage options, consider getting a personalized home affordability estimate powered with real time rates. Zillow Home Loans’  BuyAbility℠ tool provides a fun, easy way to get real-time insight into your home buying budget. By answering a few questions about your financial profile, we can provide you with a personalized mortgage rate and help you find homes that fit within your budget.

Disclosure: The content provided here is for informational and educational purposes only and is not intended as financial, legal, or tax advice. You should not rely on it as a substitute for advice from qualified professionals who are familiar with your individual circumstances. Before making any financial or legal decisions, you should consult with a licensed financial advisor, mortgage loan officer, attorney, or other appropriate professional.

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