10 year mortgage rates can save you thousands
10-year mortgage rates are generally lower than 30-year, 20-year, or even 15-year mortgage rates.
And with a much shorter loan term, a 10 year mortgage can save you tens of thousands in interest over the course of your loan.
The catch? 10 year mortgage payments are much higher than other types. And these loans can be harder to find.
But for those who can afford the payments, a 10 year mortgage is a great tool to pay off your home faster and save interest.
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How low are the 10 year mortgage rates?
Fixed mortgage rates for 10 years are usually significantly lower than fixed rates for 30 years (the most popular type of loan).
A survey of multiple lenders1 at the time of writing found that 10-year rates are between 0.3% and 0.7% below 30-year rates.
On average, mortgage rates for 10 years were about 0.50% below mortgage rates for 30 years.
Of course, interest rates vary widely from borrower to borrower.
Your own interest rate can be higher or lower depending on your creditworthiness, loan amount, down payment and more.
That is why it is always important to buy at the lowest possible price. With a 10 year mortgage, shopping is doubly important as not all mortgage lenders offer these loans.
You need to find out a few to compare interest rates and find the best 10 year mortgage rate for you.
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What is a 10 Year Fixed Rate Mortgage?
A 10 year mortgage is simply a 10 year home loan. A repayment term is the time it takes to fully repay your loan.
Most people choose a fixed rate mortgage with a term of 30 years.
However, a shorter term such as a 10-year loan costs far less interest for two reasons:
You pay interest for much less time. If you pay x% for 30 years it will cost a lot more than paying x% for 10 years. 10 year mortgage rates are generally lower than 30 or 15 year mortgage rates. Typically, the shorter your loan term, the lower your interest rate
A 10 year mortgage probably sounds great so far. But there is one major drawback.
Higher monthly mortgage payments
The biggest downside to a 10 year mortgage – and what keeps most people from getting one – is that it has much higher mortgage payments than a longer term loan.
If you borrow a large amount over 30 years, you will receive 360 monthly payments that can be used to repay the loan.
If you borrow the same amount over 10 years, you only have 120 months to repay the same balance.
Take a look at an example of how 10 year mortgage payments compare to a 30 year loan:
10-year fixed-rate mortgage
30-year fixed-rate mortgage
Total interest paid
* The interest rates shown are for example purposes only. Your own rate will be different
Payments for a 10 year mortgage are not three times what they are for a 30 year mortgage.
But they're significantly more – enough to place this type of loan outside of most people's monthly budgets.
However, if you can afford a 10 year mortgage payment, you will save tens of thousands in interest.
Just look at the savings in the example above. For the same loan amount, a 10 year mortgage will save you over $ 115,000 compared to a 30 year loan.
For those who can swing it, buying or refinancing real estate with a 10 year loan means huge savings in mortgage interest over the years.
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Should I Use a 10 Year Mortgage Loan?
For most people, the additional monthly cost of spreading mortgage payments over 120 months instead of 360 months is just too high.
However, if you have enough cash to spare at the end of each month, it is worth exploring mortgage rates for 10 years.
Who will benefit the most from a 10-year fixed-rate mortgage?
There are some scenarios in which a term of 10 years is particularly useful
You buy another home about 10 years before you retire and want it to pay off if you do. You have a new job or a new raise that will allow you to afford the higher monthly payments. You are refinancing 5-15 years to repay your home mortgage and you don't want to restart the clock with a new 30 year loan. You want to repay your mortgage loan as soon as possible and you can afford the larger payments by getting your mortgage off other potential expenses (like a new car, remodel, or bigger house)
If you are a younger first time buyer, a 10 year mortgage may not be your best bet.
A longer repayment term frees up your monthly budget for other homeownership costs that you would normally incur, such as furnishings and repairs.
And you still have the option to refinance to a shorter loan term later, possibly as you make more money or have lower monthly debts (such as when things like a student loan or a car loan are being repaid).
Advantages and disadvantages of a 10-year fixed-rate mortgage
The federal regulator Consumer Financial Protection Bureau has a graph that neatly summarizes the pros and cons of 10-year mortgage rates:
If you think 10 years is appropriate for you, make sure your income and monthly budget are reasonably secure.
If your circumstances change, you may need longer term refinancing to make your monthly payments affordable again.
This involves paying a second round of closing costs and running the entire mortgage process again.
How a 10 Year Refinance Can Help You Pay Back Your Loan Faster
Many people refinance their existing 30 year mortgage into a new 30 year loan without thinking.
However, many homeowners should consider a shorter term refinancing.
For example, let's say you've been paying your home loan for 10, 15, or 20 years. If you reset the clock on your mortgage, your loan will be repaid for another 30 years.
Remember that your interest payments will also be reset with the new term.
Unless your new mortgage rate is much lower than the original, you could be paying more interest overall, even though your monthly payments are lower.
Many lenders offer 10, 15, or 20 year refinancing loans that allow you to get a lower interest rate and pay off your mortgage than you originally planned.
The 10-year refinancing rates are low, as are the 10-year home purchase rates. And they let you repay the loan sooner than you otherwise would have done.
Especially when you are older – and retirement is a much narrower prospect than it used to be – to repay your mortgage as soon as possible to make your golden years a lot more comfortable.
10 year adjustable rate loan versus 10 year fixed rate loan
When looking at 10-year mortgage rates, note the difference between a 10-year fixed rate mortgage (FRM) and a 10/1 adjustable rate mortgage (ARM).
You may see 10/1 ARM prices. But don't be confused. These are almost always 30 year mortgages.
The value “10/1” means that the ARM initial rate is fixed for the first 10 years of the loan. After that, it can go up or down every year depending on which direction the broader interest rate market is headed.
A 10-year FRM, on the other hand, has a fixed mortgage rate that stays the same for the life of the loan – until you pay off the loan, sell the home, or refinance. This means that payments are firm and reliable too.
10/1 ARM rates versus 10 year fixed mortgage rates
Variable rate mortgages traditionally have lower interest rates than comparable fixed rate mortgages.
Lower interest rates reflect lower risk for the lender. Because you agree to a potentially higher interest rate after the initial fixed period, ARMs are inherently less risky for lenders.
However, some of that reward has been undermined over the past decade as interest rates have generally only moved down. Interest rates that are likely to be lower rather than higher discourage lenders from offering far lower rates on ARMs.
Compared to FRMs in general, you can still find lower rates on some types of ARM, especially those with shorter fixed income periods.
However, if you hit up to 10/1 ARMs, you will likely find little advantage – and sometimes even a disadvantage.
It is almost certain that you will get a significantly lower rate on a 10 year FRM than you would on a 10/1 ARM.
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10 Year Mortgage Rates: What To Look For
As with any other mortgage, choosing a 10 year home loan is not just about the interest rate.
You still need to carefully consider your loan options and consider the following:
APR – The Annual Percentage (APR) is an estimate of the total cost of the loan per year, including interest and fees Mortgage insurance – Private Mortgage Insurance (PMI) is required for a 10 year conventional loan with less than 20% decline. Discount points – Some low price offers assume that you will pay for discount points when you take out the deal to bring your price down. A discount point usually costs 1% of the loan amountOriginating fees – These are the fees that a lender charges to set up your mortgage. They vary widely from lender to lender and are an important metric for comparing mortgage offers Home equity – If you are looking to refinance into a 10 year mortgage loan, you will likely want to have at least 20% equity in your home. Otherwise, you will need to get mortgage insurance and your monthly costs will be higher Loan program – A 10 year mortgage is likely to be a conventional or "conforming" loan. The popular FHA loan program does not offer a 10 year term
Where can I find a 10-year fixed-rate mortgage?
Most lenders don't offer 10-year fixed-rate mortgages. With many of them, you only have a choice between 15- and 30-year loans.
But that doesn't mean they're hard to find.
To name a few examples, the following major lenders offer 10 year mortgages:
Accelerate Loans offers a "YOURgage" product that allows you to choose any term between eight and 29 years (including a 10 year mortgage). New American funding has mortgage terms between 10-30 yearsUS bank offers 10 year fixed rate mortgages if you prefer a large mainstream bankCrestline funding has a MyFi product with a term of five to 40 years. However, it is only licensed in 11 states: Alaska, Arizona, California, Colorado, Florida, Idaho, Montana, Oregon, Utah, Washington, and Wyoming
This is just a selection list. There are many other lenders who offer 10 year mortgages – you may need to do a little extra research to find them.
If you don't want to tackle the job alone, you should enlist the help of a mortgage broker who can find 10 year loans and compare lenders on your behalf.
Alternatives to a 10 year fixed rate loan
Let's say you are convinced of the idea of being mortgage free within 10 years.
New home buyers have no choice but to get a new 10 year mortgage.
If you are already a homeowner, you have the option of refinancing your current mortgage on a new 10 year loan at a lower interest rate.
However, there are other ways to quickly repay your mortgage without the hassle and expense of a new mortgage or refinancing.
It is easy. All you do is pay your mortgage each month in addition to the required payment.
For this strategy to be worthwhile, you will have to pay significantly more – probably as much as you can afford each month.
This strategy is less risky than the 10 year mortgage commitment.
The additional payments are optional. When circumstances change, just stop paying. With a 10 year loan, you have to pay in full or suffer damaged loans and the potential loss of your home.
Plus, it's easy to pay extra. Most lenders understand that any additional funds received should be applied to the principal. However, it is worth looking at how to use additional funds just in case.
While chatting with your lender, make sure there are no prepayment penalties on your mortgage.
These are “fines” for repaying your mortgage early. It is true that most lenders no longer charge them fees. However, it is worth making sure your lender is not pestering you before making any additional payments.
Making one extra payment each year won't zero your credit balance as quickly as making one extra payment each month. But it definitely helps.
Instead of making one payment every month (12 per year), you make 13 payments.
Or you can switch to bi-weekly payments (one every two weeks), which add up to an additional monthly payment per year.
The arithmetic may seem strange, but it works. Typically, you make 12 full payments, that's 24 half payments. However, if you pay every two weeks, you make 26 half payments per year – or 13 full payments.
Recast your mortgage
With a rewrite of the mortgage, you can pay a one-time lump sum to reduce your mortgage balance and shorten your loan term.
Your flat rate is used to reduce your capital. The lender then recalculates all of your remaining mortgage, changes the term, and adjusts your amortization table accordingly.
This is a way to shorten your repayment term without refinancing (and without paying the closing costs again).
Not every lender allows you to rewrite your mortgage. And even those who often charge a fee for it: maybe a few hundred dollars.
However, this is much cheaper than a typical refinance.
If your lender doesn't reformulate your loan, you can almost always pay back the principal with a lump sum. However, this method is a little more chaotic as not all calculations have been adjusted to formalize the change.
Whichever of these routes you choose, talk through everything with your lender before making any additional payments.
Include your instructions for the additional payments in writing so that there is no misunderstanding.
Save money with or without 10 year mortgage interest
There are many ways you can make your dream of being mortgage free 10 years from now a reality.
If you can afford the higher payments of a 10 year fixed loan, you can shorten your loan term, lower your interest rate, and significantly reduce your overall interest payments.
But even without a 10-year mortgage or refinancing, you can save on your home loan.
15- and 20-year mortgages offer similarly low interest rates, but slightly lower monthly payments.
Or, you can use one of the strategies above to pay extra on your mortgage and repay it early.
The only question is what do you want to do.
Check your new plan (October 26, 2020)
Compare top refinancing lenders
Fixed mortgage rates for 110 and 30 years, obtained on October 23, 2020 from US Bank, Realtor.com, Bankrate, Zillow and hypothekencalculator.com. Advertised rates are based on a borrower with excellent credit and a substantial down payment. Your own rate will vary.