20 Year Fixed Mortgage Rates

Freddie Mac doesn’t track 20-year mortgage rates specifically. In general, though, the average rate for 20-year loans is slightly lower than rates for 30-year loans and slightly higher than 15-year loans. Rates on all three loan terms fluctuate in lockstep.

Mortgage rates for 30-year fixed loans have hovered around 3% since the start of the COVID-19 pandemic, and 15-year fixed loans have averaged about 2.6% in the same time, according to data from Freddie Mac’s Primary Mortgage Market Survey. The average rate for a 20-year loan would fall somewhere in between.

In 2011, the average rates for 15-year and 30-year mortgages were 3.68% and 4.45%, respectively. Even those rates are relatively low, especially compared to the peaks set in the early 1980s, when mortgage rates reached into the high teens.

Market conditions contribute to interest-rate fluctuations, but monetary policies implemented by the Federal Reserve are the primary driver. Although the Fed doesn’t set mortgage rates, it does set a federal funds rate, which is the rate banks use to make short-term loans to each other.

The federal funds rate, in turn, influences the rates banks charge to loan you money. When the federal funds rate goes up, mortgage rates tend to go up as well.

In times of economic crisis, the Fed may reduce the federal funds rate. For example, in response to the Great Recession, the Fed reduced the federal funds rate from 5.25% in September 2007 to between 0% and 0.25% in December 2008. The federal funds rate currently sits in that same range as the U.S. economy recovers from the effects of the COVID-19 pandemic.

Here are the average annual rates for 20-year fixed-rate loans over the last five years, according to data from Freddie Mac:

A good mortgage rate is one that’s substantially lower than the rates competing lenders are charging for. It’s important to compare at least three different lenders when shopping for a home loan. This will help you get a good rate on a 20-year mortgage, and it could end up saving you thousands of dollars in interest.

A lender’s mortgage rates aren’t set in stone. They vary depending on how risky a borrower you are, and that’s something you can control by:

• Maximizing your credit score: Order a copy of your credit report. Correct any errors, and if you have unpaid collections, pay them off.

• Paying down debt: Try to eliminate all of your current debt, such as car loans or credit cards, and keep average daily credit card balances low. You should also make sure you’re paying all of your bills on time.

• Making a large down payment: The more you put down, the less risk you present to the lender. In turn, they’ll likely present you with a favorable mortgage rate. Plan to make a 20% down payment on your home to avoid private mortgage insurance.

Mortgage fees are usually paid at closing. The names of the fees might vary somewhat by lender, but here’s a list of common fees to be aware of:

• Origination fee: Lender fee for organizing and putting together your loan. This is generally 0.5% to 1.5% of the total loan amount.

• Application fee: Lender fee for reviewing and processing your loan application.

• Appraisal: The fee you pay to cover the home appraisal.

• Mortgage points: This is an optional charge. You can pay points upfront in exchange for a lower interest rate.

• Mortgage insurance: Insurance premium required if you put down less than 20%. This premium is factored into your mortgage payment until you reach 20% home equity, in which case you can ask your lender to remove it.

• Prepaid/escrow expenses: This includes any interest that accrues before your first payment period, your first year’s homeowners insurance premium, and escrow deposits to cover future homeowners insurance and property tax payments.

Generally, the longer the term, the higher the interest rate. That’s because loans with shorter terms present less of a risk to lenders.

Here’s how the terms of a 20-year fixed-rate mortgage might compare to the terms of other mortgage loans:

As you can see, the shorter the loan term, the lower the rate and the less you’ll pay in interest over the life of the loan. The catch is that you’ll also have a higher payment.

Determining which loan term to pick comes down to your personal circumstances — figure out what you can afford to pay on a monthly basis, and find a loan that offers the best compromise between affordability and long-term savings. Credible can help you compare loan options from multiple lenders.

A 20-year mortgage can be a good compromise between a 15-year term and a 30-year term.

A 20-year fixed mortgage is a good choice if you:

• Plan to own your home for many years

• Can afford a slightly larger payment than you’d have with a 30-year loan but not as large as you’d have with a 15-year loan

• Want consistent monthly payments and a predictable payoff date

A 20-year fixed mortgage probably isn’t a good idea if you:

• Are on a tight budget and need to keep mortgage payments as low as possible

• Plan to move within a few years and can get a better rate on an adjustable-rate mortgage

• Can afford the higher monthly payments on a 10- or 15-year loan while still meeting your other financial obligations and goals

Choosing the best refinance option depends on your situation and the reason you’re refinancing. In general, you’ll only want to consider refinancing when you can get a mortgage rate at least one percentage point lower than your current rate.

A 20-year mortgagecould be the perfect compromise between a 15-year and 30-year mortgage. You’ll still save on interest compared to a 30-year loan, but without as high of a payment as you’d have with a 15-year loan.

You may also consider refinancing into a 30-year loan and making extra payments. This effectively lowers the amount of interest you’ll pay over the life of the loan while also offering the flexibility of a lower monthly payment if needed.