Although Fixed-Rate Mortgages are available for 40, 30, 25, 20, 15 and 10 years, this documentation will focus on details for a 10-Year Fixed-Rate Mortgage (FRM). Consumers should understand that generally, the shorter the term of a loan, the lower the interest rate they could get. Better news yet is that a 10-Year Fixed-Rate Mortgage boasts all the benefits of a traditional Fixed-Rate Mortgage. Consumers should strive to get a fixed rate loan locked-in while interest rates are low so they will benefit with a great rate for the entire life of the loan. In basic terms, “10-Year” refers to the term of the mortgage and therefore, the payments would be spread out over ten years.
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About 10-Year Fixed Rate Mortgages
Consumers may have some questions not covered so far and some of those will be addressed in this section. For instance: What happens if interest rates drop significantly a few years after the loan is secured – would the consumer still have to pay their higher rate for the whole ten (10) years? The answer is no and here’s an example – if the current interest rate is two points or more below the one the consumer is paying, the consumer could consider refinancing. Two points should cover closing costs and other fees in addition to the consumer still saving money on their monthly payments.
How about the consumer who already secured a 10-Year FRM but is now making less money after a career move–what happens now when the consumer faces new budget constraints? Options galore! Consider refinancing for a longer term, or for an adjustable-rate loan, both of which may make payments lower. Of course, if the consumer’s financial situation is to the point whereby they are unable to pay any bills, they may wish to consider a debt consolidation.
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Common Questions:
Advantages & Disadvantages of 10-Year Fixed Rate Mortgages
The premium advantage of this type mortgage is its predictability due to consistent principal and interest payments. A consumer will always pay the same amount every month. This type loan is stable because the rate will not change. No need to worry about fluctuations in the market.
The premium advantage #2 of this type mortgage is that ten years is the shortest length of term most lender currently offer. Although monthly payments will be higher, it could be well worth it if the consumer can afford it because once all is said and done, the consumer will spend less money on interest, will build equity at a quick pace, as well as outright owning the home after just a decade!
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