Variable Rate

• If you have a 20-year mortgage with a variable interest rate, your payments could increase when the index that your rate is tied to increases. This can lead to an increase in your payment. You may need to refinance for 30 years to get a lower payment.
  
  

30-Year Mortgage

• A 30-year mortgage with a balance of $175,000 and an interest rate of 7 percent will have monthly payments of $1,164.28. The finance charges that will be paid over the term of the loan are $244,140.57. The loan balance plus finance charge equals $419,140.57.
  
  

20-Year Mortgage

• A 20-year mortgage loan with a balance of $175,000 and an interest rate of 7 percent will have monthly payments of $1,356.77. The finance charge paid over 20 years will be $150,625.55. When you add the loan balance to the finance charge you get $325,625.55. The savings in finance charge is $93,515.02 just by cutting your loan term by 10 years.
  
  

Considerations

• If you have a 30-year mortgage and you want to pay off in 20 years, you can avoid refinancing. Simply look up the 20-year mortgage payment using a mortgage loan calculator and start paying the new payment. You can avoid additional costs this way.
  
  

Benefits

• Whether you get a 20-year mortgage or 30-year mortgage, always shop around so that you can get the best rate possible. Compare the costs you will incur from each lender.