Dec

Why a 10 Year Mortgage May Make Sense

By emily

Have you ever thought about getting a 10-year mortgage? In this day and age, with high housing prices and potentially rising interest rates affecting the affordability of “average” or “starter” homes in many markets, it’s hard for many people to afford to get in to their first home.

In fact, there is a lot of buzz about 40-year mortgages these days.

The most common duration for a fixed rate mortgage is currently 30-years, but 15-year mortgages are also fairly common and have the beneift of having a lower interest rate. Get-out-of-debt gurus, such as Dave Ramsey, encourage the use of a 15-year mortgage with a fixed rate, putting 20% down upfront as your down payment. Then, he says, you should work to pay off your home early.

So, with all this discussion about the right length for a mortgage, what do you think is the right term for your next mortgage?

Is A 10-Year Mortgage Right For You?

What is your greatest dream? For many people, it is buying a home. Unfortunately, most people have to depend on financial institutions to find the money required to make their dreams come true. Such an expensive purchase also requires careful planning and with many institutions vying with one another to attract potential customers, there are many schemes that have come up that allow many people to secure themselves a home. One of these schemes is the 10 year mortgage plan. With those having the payment capacity, this is considered the most beneficial for a number of reasons.

What Are The Advantages Of A 10-Year Mortgage?

A 10 year mortgage plan allows the home owner to be free within just 10 years unlike the 20, 30 and 40 year mortgages. The interest on 10 year mortgages is also substantially less compared to the above-mentioned schemes. While the rates of interest charged differ with lending services, they generally play on more or less the same level. The interest is comparatively less and less biting in all cases. Another advantage of a 10 year mortgage is that these loans are the best option for anyone looking to upgrade within a short time. Consider also the current economic scenario. You will save a lot of extra payments with a 10 year mortgage by quickly paying off your debt as opposed to taking a longer repayment period that comes with higher interest rates. In addition to the above, your equity value grows phenomenally faster and you get to enjoy peace of mind earlier.

Potential Downsides To The 10-Year Mortgage

However, despite all the advantages, there is a flip side to this as well. One is that the monthly installments on these mortgages are much higher. This means that your monthly income must be enough to pay off your mortgage in addition to other necessities. If you feel that you cannot afford it, it is better that you do not go for it. For most people, longer term mortgages are more manageable. However, you are in a much better position if you can afford to take a short term mortgage. Long term mortgages have a major disadvantage of the fact that compared to a 10 year mortgage, a longer mortgage, even as short as a 15-year mortgage almost doubles the interest rate. As the loan term increases the rate difference goes up considerably. Indeed, there is no other option better than a 10 year mortgage that will offer fast equity growth, quick freedom from debt and subsequent tranquility in life than a 10 year mortgage.

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