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When buying a home, you have a choice of a number of different mortgage rates and terms. Most home buyers spread their mortgage payments over multiple decades, but if you want to pay off your home more quickly, a 10-year fixed-rate mortgage may be right for you.
10-year fixed-rate mortgages typically have lower interest rates than other loans because of their shorter repayment timeline. Each payment remains the same for the life of the loan, and payments are calculated so that the loan is paid off one decade after the homeowner first borrows the money.
Whether you can qualify for a 10-year mortgage or not, as well as your rate, will depend on your financial situation. This guide will review your options and help you to determine if a 10-year mortgage is right for you.
In This Guide:
- Mortgage Rates Over Time
- What is a 10-Year Fixed-Rate Mortgage?
- Does a 10-Year Fixed-Rate Mortgage Make Sense for Me?
- 10-Year Mortgage vs 30-Year Mortgage
- Where Can I Find the Best 10-Year Mortgage Rates?
Mortgage Rates Over Time
Mortgage rates can go up or down over time. Here’s how mortgage rates have changed over time.
What is a 10-Year Fixed-Rate Mortgage?
A 10-year fixed-rate mortgage is a mortgage loan repaid over a decade. When you take out a 10-year loan, your principal and interest payments are calculated to ensure that you will have repaid the entire loan balance by the end of the loan term.
Your payments never change for the entire life of the loan, unlike an adjustable-rate mortgage, and you will own your home free-and-clear after 10 just years.
Does a 10-Year Fixed-Rate Mortgage Make Sense for Me?
A 10-year fixed-rate mortgage is a good option for you if you want to pay back your loan as soon as possible and minimize your interest costs. 10-year mortgages generally have lower interest rates than their more common 15-year or 30-year loan counterparts.
They might also be a good option if you already own your home and you want to refinance your mortgage lower your monthly interest rate.
>> Read More: Mortgage Refinance Calculator: How Much Could You Save?
However, you must be able to qualify for a 10-year mortgage. When you apply for a home loan, lenders consider your debt-to-income ratio. This compares your monthly debt payments, including your mortgage, to your income.
The payment on a 10-year mortgage is going to be much higher than on a 15-year or 30-year mortgage because you have to pay the loan over a much shorter time period.
This means your income will need to be high enough or your house cheap enough that this short-term mortgage is considered affordable and your debt-to-income ratio isn’t pushed too high.
Benefits of 10-Year Fixed Mortgage Rates
There are some significant benefits to 10-year fixed-rate loans:
- 10-year mortgage rates are lower than with longer mortgage terms.
- In addition to lower rates, your debt will be subject to interest for a much shorter amount of time.
- You’ll own your home much sooner than with a longer mortgage.
Downsides of 10-Year Fixed Mortgage Rates
There are also some big downsides to 10-year fixed-rate mortgages, including:
- Higher monthly payments.
- Loans may be harder to qualify for if the higher payments make your debt-to-income ratio too high.
- There’s an opportunity cost—you can’t do other things with your money, such as investing, if you’re making much higher mortgage payments.
10-Year Mortgage vs 30-Year Mortgage
The table below shows how the key differences between a 10-year mortgage and a 30-year mortgage, which is a much more common type of loan among home buyers.
|Loan Amount||Interest Rate||Loan Term (In Months)||Monthly Payment||Total Interest Paid|
This example shows not just how much more you’d pay each month, but also how much you’d save in total if you opt for a shorter mortgage.
However, you’ll want to compare loan terms yourself based on the loan you qualify for. Our mortgage calculator can help you understand how much different loan amounts and terms would cost you.
When deciding if you can afford a 10-year mortgage, don’t forget you’ll have additional housing costs to pay. This could include:
- Private mortgage insurance (PMI) if your down payment is less than 20%
- Property taxes
- Homeowner’s Association (HOA) fees
- Routine maintenance costs
Where Can I Find the Best 10-Year Mortgage Rates?
Whether you’re buying or refinancing, you should always compare rates from multiple lenders. Mortgage rates are based not just on prevailing rates, but also on factors specific to you, such as your credit score, income, the area you’re buying, and the value of the home you want.
You should ask for quotes from a few of the best mortgage lenders to see who offers you the most favorable terms.
Author: Christy Rakoczy