"The benefits of a 20-year term are that you pay down your principal more quickly and build your equity faster, which is great if you have to sell your home," says Findlay. "The interest rate is a little lower than a 30-year home loan, and because you repay the loan over a shorter term you pay a lot less in interest."
The difference in the mortgage rates between a 20-year and a 30-year loan varies, but averages about one-quarter to one-half of 1 percent, says Walters. For example, on a $200,000 30-year fixed-rate loan at 4.5 percent, you would pay $164,813 in interest, but with a 20-year loan at 4.25 percent, you would save $67,580 in interest along with 10 years of payments. However, your monthly payment will be $225 higher.