Regarding mortgages, homeowners such as you may be familiar with the common 15-year or 30-year fixed mortgage. Many homebuyers and refinancers usually opt for either one of these two fixed rate mortgages here in Salt Lake City, and even in the rest of the country.
Sometimes, however, a 15-year or a 30-year fixed mortgage may not be the best for you.
15 and 30-Year Mortgage Issues
A 15-year fixed mortgage can have high payments that you may not be capable of paying for with your current financial situation. On the other hand, although the 30-year fixed mortgage has low payments, you may want to pay off your loan earlier than 30 years.
With such issues with both the 15-year and 30-year, what loan can you choose?
Enter the 20-Year
When you are looking to apply for a loan or looking to refinance, a 20-year fixed mortgage may be the best for you. A 20-year offers the best of the 15-year and the best of the 30-year. Of course, you have the shorter period, although not quite short as to shoot your payments through the roof.
A 20-year also offers a lower interest rate than a 30-year.
Lower Interest, More Savings
The average 30-year mortgage rate currently sits at 3.97 percent. With a 20-year, you can squeeze that rate down to 3.75 percent. With a quarter-percentage point lower than the 30-year’s average, a 20-year can grant you considerable savings.
You can do the calculations yourself and see how much you can save.
Shorter Period, More Savings
Now, as mentioned previously, a 20-year can also be a great option for refinancers, refinancers who currently have a 30-year mortgage. Refinancing to a 20-year fixed mortgage not only gives you a chance at a lower rate, but also reduces the amortization period.
Such a move can also contribute to the amount of savings you will gain at the end of a 20-year loan term.
The 20-year fixed mortgage loan remains a rarely used home loan. You can consider your circumstances, however, and a 20-year loan may just be the best loan you can get.