As of December 2, 2024, the average APR on 10-year mortgage rates is 5.84%. This makes for an attractive option for homebuyers. You get to put more toward your monthly payment and reduce your principal balance faster.
Additionally, you can build your home equity quicker. It is a great option if you want to sell or refinance in the future. So, get pre-approved now and gain more confidence in your home search.
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What Is a 10 Year Mortgage?
This mortgage term lets borrowers repay the lender in 10 years. You pay lower total interest but your monthly payments increase due to the shorter term. It’s ideal if you want to save on interest and build home equity faster.
While the payments are higher, long-term savings and quicker homeownership can make it a smart financial move. However, you should be prepared to make a down payment of 10% to 20% of the home’s purchase price.
Eligibility Requirements for a 10 Year Mortgage
To apply for a 10-year home loan, you must have:
- Good Credit Score: To apply for a 10-year mortgage, you need a FICO credit score of 620+ or ideally above 700 for better rates, though lenders’ criteria vary.
- Low Debt-to-Income Ratio: Generally, a lower DTI ratio is preferable, but aim for at least 43%. However, some lenders may have stricter requirements.
- Stable Income: Lenders may ask for proof of income, which includes pay stubs, tax returns, or employment verification.
How to Apply for a 10 Year Home Mortgage?
Here are the steps you need to follow:
1. Search for Lenders: Compare different lenders to find the best rates and terms.
2. Gather Documents: Collect essential formal documents like bank statements, tax returns, and proof of assets to streamline your application.
3. Get Loan Pre-Approval: Request a mortgage pre-approval to clarify how much you can borrow. It shows the sellers that you’re serious.
4. Submit Your Application: After you select a home, submit a formal mortgage application with the required documents.
5. Review Loan Terms: Understand the interest rate, monthly payments, and terms before you finalize your 10-year mortgage.
6.Complete Underwriting: Your lender will verify your financial details and assess the risk to approve your loan.
7. Close the Loan: You need to sign the final documents and pay closing costs (about 3–6% of the loan amount). Once done, your loan will be disbursed.
Pros and Cons of a 10 Year Mortgage
The advantages and disadvantages are as follows:
Pros
- Short-Term Debt: You pay off your debt sooner than the more common 15-year and 30-year mortgage. This reduces future financial strain.
- Reduced Interest Rates: You pay a lower interest rate because the loan period is as short as 10 years.
- Quicker Ownership of a Home: You pay off your mortgage in just 10 years. This helps you to own a home more easily.
Cons
- Reduced Financial Flexibility: You pay higher monthly payments. It can lead to difficulties in case of unexpected financial emergencies.
- Restricted Loan Options: A 10-year mortgage fixed rate can limit your ability to get the best rate or terms for your situation.
- Strict Eligibility Requirements: With a shorter loan term, lenders require higher income to ensure you can repay. They may also demand a credit score of at least 700 or higher.
What Are the Alternatives for a 10 Year Home Loan?
There are several fixed rate mortgage options, like:
Long-Term Mortgages
- 15-Year Fixed Rate Mortgage: It balances 10- and 30-year terms with lower payments than a 10-year loan.
- 20-Year Fixed-Rate Mortgage: It is the best option if you want manageable payments with lower interest costs.
- 30-Year Fixed-Rate Mortgage: This can be the ideal choice if you seek low monthly payments. However, this incurs higher interest over the loan’s life compared to shorter terms.
- Adjustable-Rate Mortgage: It offers a fixed interest rate for the initial few years of 3 to 10 years. Past that the interest rate changes periodically based on market conditions.
- Interest-Only Mortgage: You pay only interest for five to ten years, which lowers your initial payments. However, once the period ends, your expenses might increase significantly.
Government-Backed Loans
- VA Loan: Only active duty members, veterans, and their families are eligible for this. It offers advantages like no down payment or PMI. VA loans also offers competitive interest rates.
- FHA Loan: This is designed for low-credit buyers. FHA loans have lower down payments and flexible qualification requirements. However, it comes with MIP that raises overall costs.
- USDA Loan: It is for buyers who live in rural and suburban areas. USDA loans also provide low interest rates and have no down payment.
Are 10 Year Mortgage Rates Suitable For Me?
Yes! It can be a good option for you if you want to pay off your mortgage faster and save on interest. It offers the advantage of faster homeownership and lower total interest.
However, you should also make sure that the higher monthly payments fit within your budget. If your budget allows, you can become a proud owner of your dream home within just a decade!
Frequently Asked Question
What is a 10 year mortgage?
A 10 year mortgage is a home loan that you repay over 10 years. It is a shorter repayment period, which requires you to pay high monthly payments with low interest rates.
How do I qualify for a 10 year home loan?
To be eligible for a 10-year mortgage, you must have a good credit score of 700 and a low debt-to-income ratio. You will also need to make a large down payment to get the loan.
What are the benefits of a 10-year mortgage?
The main benefits include quicker mortgage pay-off, savings on interest, and faster home equity build up.
