Most people have heard ofand , but have you heard of a 10 year mortgage? This little-known type of mortgage could save you big in interest, if you can afford a high monthly payment.
A 10-year mortgage is less common than other types of mortgages, but it has its own unique advantages. Although your monthly payments are higher than those of other types of mortgages, you could save a significant amount in interest over the life of your home loan.
Additionally, 10-year mortgage rates are still relatively low compared to mortgage rates in general, which means they offer valuable financial advantages in the current economic climate.
Here’s everything you need to know about what a 10-year mortgage is, how it works, and how to find the lowestpossible.
What is a 10 year mortgage?
Ten-year mortgages work exactly the same as other types of mortgages, but instead of paying off your mortgage in 15 or 30 years, you’ll pay it off in 10 years. It may make senseif you can afford a higher monthly payment, want to save big on interest payments, and don’t want to pay off your mortgage over decades. You apply and qualify for a 10-year mortgage in the same way as other types of mortgages.
Although 10-year mortgages are not that popular,will not change if you have a 10 or 30 year mortgage. You should expect to pay all the same fees, including and assembly costs.
It is important to speak with several lenders and do your research before choosing one. Interviewing more than one lender will help you find the lowest rate and fees for your personal financial situation. The more information you gather from lenders, the better your chances of getting a lower rate.
Evolution of 10-year fixed-rate mortgage rates
Currently, 10-year mortgage rates are below 5%, while 30-year mortgage rates are in the low to mid 5% range. Since the beginning of this year, mortgage rates have slowly increased by around 3%. While it’s uncertain where rates will land over the rest of the year – if inflation continues to rise, mortgage rates could climb – locking in a 10-year mortgage rate as it wobbles in below 5% could save you tens of thousands in interest. Even a percentage point or two can make a significant difference in the interest you pay on your mortgage.
Current mortgage and refinance rates
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. The table above summarizes the average rates offered by lenders across the country.
Advantages of a 10 year mortgage
- Reduced interest rate: You will pay a lower interest rate for a 10-year mortgage than for other types of mortgages because the bank is taking less risk by lending you the money for a shorter period. Plus, you reduce the total interest you’ll pay overall.
- Repay your loan faster: You could save tens of thousands of dollars over the life of your loan by paying it off years faster than other types of mortgages, allowing you to build up equity in your home faster.
Disadvantages of a 10 year mortgage
- High monthly payments: If you can’t afford high monthly payments, a 10-year mortgage probably isn’t for you.
What is the difference between a 15 and 10 year mortgage?
With a 10-year loan, you will benefit from a slightly lower interest rate and therefore pay less interest over time. This means that your monthly mortgage payment will be higher, even though the overall loan will be more affordable in the long term. You will also repay the loan in 10 years, instead of 15.
What is the difference between a 10 and 30 year mortgage?
It will take you one-third the time to pay off a 10-year mortgage compared to a 30-year mortgage, saving you tens of thousands of dollars in interest over the years. You’ll also pay a lower interest rate than a 30-year loan. Expect a higher monthly payment, although you’ll still save money overall.
How do I qualify for a 10-year fixed rate mortgage?
Eligibility for a 10-year mortgage is the same as eligibility for other types of mortgages, but income and credit score requirements will be more stringent to ensure you can afford make higher monthly payments.
Make sure you have all of your financial documents like tax returns and payslips in order, as the lender will take almost every aspect of your financial life into consideration when determining whether or not you can repay the loan. Things like your income, credit score, amount of debt, and loan-to-value ratio all affect the rate a lender will offer you.
Other mortgage tools and resources
You can useto help you determine how much house you can afford. CNET’s mortgage calculator takes into account things like your monthly income, expenses and debt repayments to give you an idea of what you can handle financially. Your will depend in part on these income factors, as well as your credit score and the zip code where you are looking to buy a home.