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Finding The Best 20 Year Mortgage Rates

Updated on August 23, 2011

20 Year Mortgage Rates

One of the most desired contemporary mortgages is the twenty year fixed or adjustable rate loan. Many financial institutions now offer 20 year plans that may well suit your needs and budget requirements, but can be hard to find due to the clutter that surrounds mortgage deals nowadays.

Fixed loan interest rates for a 20 year loan will be lower than a 30 year plan, although the monthly payments will be a little steeper. Twenty-year plans therefore, are a compromise in terms of long-term payment and short-term financial liquidity. Whatever the case may be, fixed rate loans will remain stable, allowing borrowers to settle into a routine whereas borrowers who choose an adjustable rate plan may benefit from lower interest rates that are subject to change. But let's dig a little deeper!

What You'll Need

Before you begin your search make sure you are eligible for a 20 year mortgage first.

  • Make an expense roadmap.
  • Determine how large a loan you qualify for.
  • Determine the value of the desired property.
  • Check your credit rating. Some lenders will be more lax than others, there's always something for any credit rating, but bad credit ratings may (ironically) result in higher rates.
  • Make sure the 20 year plan is truly what you need.
  • Browse multiple reputable financial sources (don't settle).
  • Get pre-approved (this can be an arduous and tedious process.

Fixed Vs Adjusted (ARM)

Fixed rate mortgages offer fixed interest rates and monthly payments over a pre-determined amount of time such as 10,20 and 30 year mortgage plans. The advantage here is being able to predict your payments effectively.

Adjustable rate mortgages allow borrowers to share risks with lenders and reap the benefits of lower interest rates. The problem is that the rates are subject to change. Another option is nowadays presented in a form of combined loan, which seeks to offer the benefits of both types of mortgage listed above.

Finding The Best Rates

Researching mortgages is often done on a comparative, state-by-state basis. Obviously, consolidating every individual state's continuously fluctuating interest rates is a little hard to achieve, but thankfully there are a number of websites that perform these searches efficiently. Bankrate offers one such free comparison engine with updated offers. Simply enter your state of residence as well as the basic financial details and you're off (you needn't buy anything, but the returned results will allow you to streamline your search drastically). For a list of private mortgage comparisons please refer to the following section.

Conventional loans such as these are private loans from private institutions. Bear in mind that you may qualify for a federal loan which offers a vast spectrum of advantages as well. Two such federal loan programs are provided by the Federal Housing Administration and the Department of Veterans Affairs. Federal loans entail a different set of requirements which may make them less palatable or restrictive to some (such as selective service).

Some sample rate examples for 20 year loans in Alabama.
Some sample rate examples for 20 year loans in Alabama. | Source

Streamlining Your Search

Here are a couple of engines that will allow you to compare 20 year mortgage rates in your state (don't forget to set the state, although rates are similar across the board).

My personal research shows that the twenty year variant is significantly less common than 10 and 30 year plans, but don't give up! Many reputable financial institutions are willing to tailor their loans, so don't hold back on your questions when it's time to strike.

Expenses To Be Aware Of

Ideally, word of mouth can go a long way in finding the right broker. Make sure you read the fine print and demand that the expenses are laid out in their entirety. A mortgage broker that wavers and seems to not be very loquacious will usually have a reason to ward off questions. Examples of "hidden" costs are (I suggest you jot them down and as the lender about these directly):

  • Appraisal fees.
  • Lender fees.
  • Home insurance.
  • Down payments.
  • Legal registration fees.
  • Taxes.

These costs can escalate if overlooked, if you leave a meeting feeling confused or unsure of what you're going to be shelling out, you are potentially setting yourself up for disaster! Ask, ask and ask again, if you find the broker slimy and deflective, keep shopping around! Rates are not everything!

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