Posted by Apex Home Loans ● August 19, 2020

20 Year Refinance Rates Dive to Record Lows, Ready for a new Mortgage?


The often overlooked 20-year fixed rate mortgage is gaining a much-deserved spotlight as refinance rates have hit record lows. In the second installment of our Refinancing Recommendations series, we’re moving beyond the basics – such as determining your break-even point and identifying your refinance goals – for a deeper look. Here are two considerations homeowners should weigh when refinancing into a 20-year mortgage.

  1. Interest Savings and Changes to Monthly Payment

For new purchase loans, 20-year mortgages cut a decade off a more typical 30-year mortgage, saving homebuyers significantly on mortgage interest and helping them to pay the loan off quicker. For refinancing homeowners, the impact of these benefits will depend on their current situation. The most common scenario our customers face is simple: they are five to 10 years into their 30-year mortgage and do not want to revert their term back to 30 years. In this situation, refinancing into a 20-year mortgage allows you to pay off your loan within your target timeframe and potentially reduce the interest rate of your loan. In this situation, a 20-year loan is likely a good option with few caveats.

For buyers who are only a few years into their 30-year mortgage and considering switching to a 20-year term, careful planning for changes to monthly payment amount is critical. The switch allows them to accelerate their loan payoff; however, that acceleration could lead to a higher monthly cost, depending on their existing loan terms. A mortgage banker can help determine the new monthly mortgage cost – and also pinpoint the exact amount in interest the homeowner stands to save in the long run.

  1. Qualifying for a New Mortgage

If a refinance makes sense for you, make sure you qualify for a mortgage and get an idea of your home’s value, which could impact the interest rate of your new loan. If your home has appreciated in value, you may be eligible for a lower refinance rate than anticipated. The opposite is also true. A refinance requires a new underwriting process, so your home will ultimately be re-appraised in the process. Several factors influence your ability to qualify for a loan, most notably the amount of equity you have in your home, your income, and your credit. Get started determining your ability to qualify by checking your credit report, downloading our documents needed to refinance checklist and reading our Pitfalls to Avoid When Refinancing blog.


20-year refinancing rates are compelling right now. If you are five to 10 years into a 30-year mortgage, this mortgage term could be the perfect fit, allowing you to save on your monthly payment and meet or reduce your target payoff date. If you are only a few years into a 30-year mortgage, refinancing into a 20-year term may increase your monthly payment amount but save you considerably in loan interest. Need help evaluating your options? Contact us.

Please be aware: by refinancing your existing mortgage, your total finance charges may be higher over the life of the loan


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Topics: Refinance, What does a refinance cost?, Refinancing Simplified, home loan refinance, refinance rates, 20 year finance rates