Benefits Of A 10 Year Mortgage [mortgageinsuranceguide.blogspot.com]
Outside of variable mortgages,the most common fixed term for most buyers is 5 years.Over the last 20 years there have been times when taking a longer term than 5 years looked good and with rates so low,people maybe looking at it again. In video #9,Brian gives you an overview of the pro's and cons of a 10 year fixed term mortgage versus a 5 year and suggests a mortgage strategy that may give you the best of both worlds!
mortgageinsuranceguide.blogspot.com Mortgage Straight Talk-Video#9-Choosing a 5 or 10 year Fixed Mortgage-Strategy.m4v
Benefits of a 10 Year Mortgage
With mortgage interest rates near historic lows, now might be the right time to consider refinancing down to a ten year fixed rate mortgage. 10 year fixed rate mortgages are amortized over a 120 month period allowing borrowers the ability to pay off their mortgages in a fraction of the time of other fixed rate products. 10 year mortgage rates tend to be in line with or slightly lower than 15 year fixed mortgage rates. The biggest hurdle with 10 year mortgages is that the repayment period is so short making monthly mortgage payments considerably higher than 30 year and 20 year fixed rate home loans.
In today's rate environment, homeowners who once where unable to afford 10 year mortgage payments may be able to handle the higher payments. When you factor in how much interest is accrued over a thirty or twenty year span, 10 year mortgages start to look very appealing.
Let's look at some examples:
10 Year Fixed Rate Mortgage
$ 200,000 Loan Amount
Note Rate of 4.000%
Monthly Principal and Interest Payment: $ 2,024.90
Estimated Interest Paid Over 30 Years: $ 42,988.33
Interest Saved Vs. 30 Year Fixed Mortgage = $ 143,232.24
Interest Saved Vs. 20 Year Fixed Mortgage = $ 70,485.29
Interest Saved Vs. 15 Year Fixed Mortgage = $ 27,831.90
30 Year Fixed Rate Mortgage
$ 200,000 Loan Amount
Note Rate of 5.000%
Monthly Principal and Interest Payment: $ 1,073.64
Estimated Interest Paid Over 30 Years: $ 186,511.57
20 Year Fixed Rate Mortgage
$ 200,000 Loan Amount
Note Rate of 4.875%
Monthly Principal and Interest Payment: $ 1,306.14
Estimated Interest Paid Over 30 Years: $ 113,473.62
15 Year Fixed Rate Mortgage
$ 200,000 Loan Amount
Note Rate of 4.250%
Monthly Principal and Interest Payment: $ 1,504.56
Estimated Interest Paid Over 30 Years: $ 70,820.23
The examples above show the potential for interest savings over the life of the various loan programs when compared to a 10 year fixed rate mortgage. It also illustrates how much higher the monthly principal and interest payments are with each product. Rates and terms may vary by lender so be sure to speak with a licensed mortgage professional to verify the accuracy of the aforementioned example and to request current rate information. Another way to knock years of your mortgage and save interest is to make additional principal reduction payments periodically thus paying off your principal balance in a shorter window of time. Making an extra principal payment every year could knock years off the life of your mortgage. Borrowers do need to consider that some mortgages have prepayment penalties and that they should ask their mortgage professional if there are any prepayment penalties associated with their mortgage products before making a decision. Certain states do not allow p repayment penalties on first mortgage programs.
While a ten year mortgage may not be realistic for many homeowners, those who can qualify and afford the higher payments will likely see large savings in the long run. Contact your mortgage professional for a rate quote and debt-to-income analysis to see if a 10 year mortgage is the right fit for you.
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