10-Year Fixed Mortgage Rates | fox business
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Nearly 90% of buyers choose a 30-year mortgage when buying a home, according to Freddie Mac. Although 10-year mortgages are less popular, they may also be worth exploring. Compared to 30-year mortgage rates, 10-year mortgage rates are generally lower.
But 10-year mortgages also have drawbacks, such as higher monthly payments than longer-term loans. Here’s what you need to know about 10-year mortgage rates, the pros and cons of 10-year mortgages, and how to find a mortgage that best suits your needs and budget.
If you’re considering a 10-year mortgage, Credible lets you compare pre-qualified mortgage rates in minutes.
Current Trends in 10-Year Mortgage Rates
Here’s how mortgage rates have moved over the past 12 months.
Here’s what the average annual mortgage interest rate looked like over the past three decades.
Changing economic conditions, central bank policy decisions, investor sentiment and other factors influence the movement of mortgage rates. Credible’s average mortgage rates and mortgage refinance rates are calculated based on information provided by partner lenders who pay compensation to Credible.
The rates assume a borrower has a 740 credit score and is borrowing a conventional loan for a single-family home that will be their primary residence. Rates also assume no (or very low) discount points and a 15% deposit.
Credible mortgage rates will only give you an idea of current average rates. The rate you receive may vary depending on a number of factors.
Credible, it’s easy to compare mortgage rateswithout affecting your credit score.
Advantages of a 10 year mortgage
A 10-year mortgage has several advantages, including:
- Lower interest rates — A 10-year mortgage usually has a lower rate than a longer-term loan. If you get one, you could save a lot of money on interest.
- Lower Total Refund Amount — The amount of money you pay over the term of the loan will likely be less than what you would pay with a longer term loan. For example, if you took out a $200,000 15-year mortgage at 3% interest, you would pay $248,609 over the life of the loan. In contrast, taking out a 10-year mortgage with the same term, rate, and amount would cost a total of $231,745, a difference of $16,864.
- Build equity faster — Since your loan term is shorter, more of your payments will go towards the principal. This allows you to build up equity in your home faster.
But 10-year mortgages also have some drawbacks that you’ll want to consider:
- Higher monthly payments — Since your payments are only spread over 10 years, your monthly mortgage payments will be higher than a longer-term mortgage.
- Less flexibility in your budget — Due to higher payments, you may have less cash to devote to other important financial goals, such as retirement.
- Potentially smaller loan — With a higher monthly payment, you may have a harder time meeting a lender’s minimum debt-to-equity ratio and borrowing the amount of money you want to spend on a home.
Follow these steps to find the right one mortgage lender and the mortgage that best suits your unique financial needs and goals:
- Check your credit. Before you start shopping for your mortgage, check your credit report to see how your score is and to check for any errors. This will give you an idea of the mortgage products you may be eligible for.
- Review your budget. Before taking out a mortgage, review your monthly expenses and income to see how much you can afford. If you need help, consider using a mortgage calculator to estimate your mortgage costs.
- Research and compare lenders. To find the best mortgage lender, you have to shop around. You can visit several lender websites to review and compare key features, such as rates, terms, assembly costsand closing costs.
- Get pre-approved. Once you’ve chosen the best lender for your situation, submit a pre-approval request to get an estimate of rates and terms. This usually requires a soft credit check, which won’t affect your credit. Once you have officially applied for a loan, the lender will perform a thorough credit check, which may cause your credit score to drop temporarily.
How to get a good 10-year fixed rate
When you apply for a 10-year mortgage, lenders will consider these factors, among others, to determine the interest rate to offer you:
- Deposit – The larger your down payment, the less risk the lender has to take. This means that if you put more money aside, your lender may offer you a lower interest rate.
- Credit history – Lenders review your credit score and payment history to gauge your likelihood of repaying your loan. If you have good to excellent credit, it can help you get a loan at a lower rate.
- Debt-to-income ratio (DTI) — Your DTI ratio measures how much of your gross monthly income goes towards paying your monthly debt. Although requirements vary, lenders generally want to see a DTI ratio of 36% or less. If your DTI ratio is higher, a lender may charge you a higher interest rate on a mortgage.
What credit rating do you need to get a good 10-year mortgage rate?
While the credit score you need to get a good 10-year mortgage rate varies by lender, here’s a breakdown of your FICO score, which most lenders use when reviewing your credit:
- 350 to 580 — Poor
- 580 to 669 — Fair
- 670 to 739 — Good
- 740 to 799 — very well
- 800 to 850 — Exceptional
Most conventional mortgage lenders want to see a credit score of at least 620 to approve you for a home loan. Certain types of mortgages, such as VA loans and USDA loans, do not have a minimum credit score requirement. Although it is possible to get a home loan with bad credityou may not receive the best interest rates.
Is a 10-year fixed mortgage a good deal?
Whether a 10-year fixed mortgage is a good deal depends on your budget. If you can afford higher monthly payments, this option could save you thousands of dollars in interest and help you pay off your home faster. But if choosing this option would stretch your budget too much, it’s probably best to choose a longer-term mortgage.
If you’re ready to buy a home, use Credible to compare mortgage rates from multiple lenders, all in one place.
A fixed rate mortgage has an interest rate that remains fixed for the life of the loan. In contrast, an adjustable rate mortgage has a rate that is fixed for a certain period of time (and often lower at the beginning) and then fluctuates depending on the current market. This type of mortgage is also called an adjustable rate mortgage or ARM.
If you prefer predictable monthly payments and plan to live in your home for a long time, a fixed rate mortgage is probably the best option. But if you don’t plan to stay in the house for long and want a lower rate initially, it might be a good idea to get an adjustable rate mortgage.