Lowdown on 10 Year Mortgage Rates

2009-01-15 15:56:35

( Financial )



Different Types of Mortgage Loan Periods

When you apply for a mortgage loan, you may have noticed that there are various lengths of loan terms available to you.

There are 10, 15, 20, 30 and even 40 year mortgages available to most individual borrowers. Each of them come with their own features. Some have both fixed and adjustable rates, while others have only fixed rates.

The shorter 5 and 10 year mortgage rates are usually fixed, while the longer term 30 year mortgage rates have options for fixed and adjustable periods.

The 10 Year Mortgage Rate and Terms

The 10 year mortgage rate is fixed. That is, you cannot change the interest rate while the loan is in force. Each period over a span of 10 years, you will be paying interest based on the same annual percentage rate, and a part of the loan principal. The only time you will be able to change the loan terms is if you repay the entire loan in full and then reapply for another mortgage.

Benefits and Risks of a 10 Year Mortgage

The main advantage of a 10 year mortgage is its predictability. There are no changes in your regular amortizations year after year.

Since it involves a period of time that is so much shorter than 20 or 30 years, you take comfort in the fact that you will be able to get yourself free from debt sooner. You will also be able to get more equity from your home, which you in turn can use as collateral for other loans.

The stagnant nature of 10 year mortgage rates may be an advantage but only if you have gotten the loan at a time when interest rates were at their lowest. If you were that lucky, you won't need to worry about any possible increases in rates the way you would have with adjustable mortgages. Chances are almost nil that interest rates would go any lower.

On the other hand, you have a lot to worry about if the interest rate on your 10 year mortgage rate is high. You will end up overpaying if prevailing interest rates were to decrease during the loan period.

Ten years is also such a short period of time to pay for a mortgage, and can be burdensome if you are earning barely enough each month.

Before deciding on whether this is the right mortgage period for you, you should discuss the matter carefully with a loan officer. Work out the terms and conditions, most especially the amortization payments. You can also use an online mortgage calculator to get the amortization estimates.


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