You may not know that you can refinance with fixed rate mortgages with terms ranging from five to more than 40 years -- not just the popular 30-year and 15-year refinances. One such “oddball” refinance loan is the 10-year fixed mortgage loan.
What Is It?
The 10-year fixed refinance takes just ten years to repay. When you repay a fixed refinance, part of the monthly amount covers the previous month’s interest charge, and the rest reduces your mortgage balance. As you pay down your balance over time, less is needed to cover the interest and more goes toward paying off your loan. This is called amortization.
With fixed rate mortgages, the interest rate (and the principal and interest payment) do not change over the life of the refinance.
What’s Great About It?
The 10-year refinance amasses equity very rapidly and reduces the interest you pay over the life of the refi. Not only do you pay interest over fewer years but the interest rate should be even lower than that of 15-year loans.
What’s Not Great About It?
Your 10-year refinance payment is significantly higher than that of a 15-year mortgage. Make sure that you can safely afford it before committing to a loan of this type.
The table below shows the difference between the payment and total expense for 10, 15, 20 and 30-year loans, assuming a four percent rate for the 30-year mortgage, a 3.75 percent rate for a 20-year program, a 3.5 percent rate for a 15-year loan and 3.25 percent for a 10-year loan.
|Total Interest Paid||$21,494||$33,144||$45,435||$71,870|
Who Is it For?
The 10-year fixed rate refinance loan is the right mortgage for homeowners who want to become mortgage-free as quickly as possible -- as long as they have the income to safely do it.
How Do You Get a 10-Year Mortgage Loan?
Finding 10-year refinances is more difficult than finding 15-or 30-year mortgages. LendingTree's Loan Explorer can make it easier to contact more lenders and compare quotes for 10-year home loans.
NOTE: When shopping for a 10-year mortgage refinance, make sure that you’re being offered a lower rate than what’s available for a 15-year loan. With fewer programs available and less competition, there’s no guaranty that the interest rate is lower than available 15-year offers. If the 15-year refinance is cheaper, choose it and simply make larger payments to repay the mortgage in ten years.
In addition, check out the rates on 10-1 hybrid ARMs. If they are lower than 10-year fixed mortgages, you can opt for the ARM and pay if off in ten years instead of 30.