Though uncommon, a 10-year fixed rate mortgage can be an excellent tool for home buyers who don’t want to be weighed down by the stress of a long loan term. With a 10-year fixed rate mortgage, your loan will retain one consistent interest rate over the course of the loan -- and will be paid off in full after ten years.
A homeowner who opts for a ten-year fixed rate mortgage should be prepared to pay much more per month, given the short term of the loan. However, the shorter term also means you’ll be paying significantly less in interest, and you’ll most likely lock in a much lower rate than you would with a 15-year mortgage or 30-year mortgage.
Here’s some more information to help you decide if a 10-year FRM is right for you.
Is a 10-Year Fixed Rate Mortgage (FRM) Right for Me?
Ten-year FRMs are uncommon, but they can be incredibly powerful in the hands of the right type of home buyer. If you meet some or all of the following criteria, a 10-year FRM might be right for you.
You have the means to make higher monthly mortgage payments.
You don’t want to pay excessive interest over a long loan term.
You want to start paying down the principal of your loan faster.
You want to take advantage of current interest rates (if they’re low).
You like the idea of having the same, consistent monthly payment over the next ten years.
You can afford a large down payment
You have a reliable source of income
The down side of a 10-year fixed rate mortgage is that it’s expensive on a month-to-month basis: while a 30-year FRM on a $200,000 house at today’s rates would cost $1,043.29, the payment on that same house for a 10-year FRM would be $2,048.75. If this difference is too extreme, there are other in-between options (like the 15-year and 20-year FRM) that may fit your needs better.
The Interest Rate on a 10-Year FRM
The interest rate on a 10-year FRM will generally be much lower than its longer-term counterparts, which helps to offset the higher monthly payment you’ll be making with this loan. As of 2018, the interest rate for a 10-year FRM is around 4 percent or lower. Like with any FRM, the great thing about the 10-year FRM is that you’ll lock in today’s rate for the life of your loan -- so if you want to take advantage of low rates, this product may be the one for you.