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If you’re thinking about refinancing your mortgage, it’s a good idea to keep an eye on interest rates as they can fluctuate day by day. It’s also important to weigh your refinancing options. For example, you might consider a conventional 10-year fixed loan. Having a fixed rate means your rate and payment will stay the same throughout the life of the loan.
Additionally, rates on loans with 10-year loans tend to be lower compared to rates on loans with longer terms. However, while you could save money on interest, you’ll also likely end up with a higher monthly payment.
10-Year Refinance Rates Today
The current average rate on a 10-year refinance is 4.82% compared to the rate a week before of 5.04%.
The 52-week high rate for a 10-year refinance was 5.46%, and the 52-week low was 4.41%.
Current 10-Year Refinance Rates
Here’s how current rates on 10-year refinance loans compare to other similar mortgage products:
What is a 10-Year Mortgage?
A 10-year mortgage is a home loan that you’ll repay over a 10-year period. This could be a good option if you are looking to pay off your mortgage faster and want to save money on interest.
Just remember that your monthly payments will likely be higher with a shorter term. If you’d prefer to reduce your monthly payment, a loan with a 15- or 30-year term might be a better choice—though keep in mind that you’ll pay more interest over time this way.
10-year Mortgage Refinance: Pros and Cons
If you’re considering a 10-year mortgage refinance, here are some pros and cons to keep in mind:
Pros of 10-year Mortgage Refinances
- Lower interest rates. Shorter 10-year terms typically come with lower interest rates compared to 15- or 30-year terms, which means you could reduce your overall interest charges.
- Faster repayment schedule. Opting for a 10-year term means you’ll likely pay off your mortgage more quickly compared to borrowers who choose loans with longer terms.
- Build equity more quickly. The faster you pay down your mortgage, the faster you can build equity in your home. This will come in handy if you want to qualify for another refinance or a home equity loan in the future.
Cons of 10-year Mortgage Refinances
- Higher monthly payments. Your monthly payments with a 10-year repayment term will be much higher compared to a 30-year or even 15-year term.
- Harder to qualify. Because the monthly payments with a 10-year term are so high, you’ll need to have a much more generous income flow to convince lenders that you can afford it.
- Less flexibility in your budget. As more of your monthly income will be going to your mortgage payments with a 10-year term, you’ll have less wiggle room in your budget if you need to cover an unexpected expense, lose your job or have a decrease in income.
How to Get The Best 10-Year Mortgage Rates
Securing an optimal interest rate on your mortgage refinance could help you save hundreds or even thousands of dollars over the life of your loan. Here are six tips that could help you get the best interest rate possible for your needs:
1. Keep an Eye on Rates
Mortgage rates fluctuate constantly. Keeping an eye on them can help you lock in a rate that you’re comfortable with.
2. Check Your Credit
Your credit has a major impact on the rate you’re offered. In general, the higher your credit score, the better your rate will be. Before you apply for refinancing, check your credit to see where you stand. You can use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, dispute them with the appropriate credit bureau to potentially increase your score.
If you can wait to refinance, it could also be a good idea to spend some time improving your credit to qualify for better rates in the future. There are several strategies that could help you do this, such as:
- Paying all your bills on time
- Paying down credit card balances
- Avoiding new loans
3. Compare Multiple Lenders
To have an easier time securing a good interest rate, be sure to shop around and compare your options from as many mortgage lenders as possible. Many lenders let you see your personalized rates with just a soft credit check that won’t impact your credit.
Also reach out to your current lender to see if there are any rate discounts available to you as an existing customer.
4. Decrease Your Debt-to-Income Ratio
Your debt-to-income (DTI) ratio is the amount you owe on monthly debt payments compared to your income. Improving your DTI ratio might incentivize lenders to offer you better rates as you’ll be considered less of a risk.
Some possible ways to do this include paying down existing debt or increasing your income.
5. Consider Discount Points
A discount point is essentially a fee that you’ll pay at closing in return for a lower interest rate, with one point being equal to 1% of your loan amount. This could be worth it if you plan to remain in your home for a long time.
6. Don’t Wait on Closing Costs
Closing costs for a mortgage refinance typically range from 3% to 6%. With some lenders, you might have the option to roll these costs into your loan; however, this usually comes with a higher interest rate and a larger overall loan cost.
Paying the closing costs upfront can help you avoid these additional charges.
How to Pay Off A Mortgage In 10 Years
Refinancing your mortgage to a 10-year term can give you a head start on paying off your mortgage in a shorter time frame. If you’d like to pay it off even faster, here are some possible strategies:
- Consider your budget. Review your monthly income and expenses to see if there are any extra funds to put toward your mortgage. Also look for areas where you can trim expenses to free up cash—for example, by canceling subscriptions or cooking at home instead of eating out.
- Make extra payments. Paying extra toward your loan principal can help you pay off your loan faster with fewer interest charges. You could also consider making biweekly payments instead of monthly payments to make 13 payments in one year rather than 12, which will also save you money on interest.
- Refund your mortgage. Unlike refinancing where you pay off your old loan with a new one, recasting lets you keep your original loan and make a lump-sum payment toward the principal. Afterward, your lender will adjust the amortization schedule so it’s based on the new loan amount. While this won’t change your rate or loan term, it will reduce your monthly payments, which could make it easier to make extra payments.
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Frequently Asked Questions (FAQs)
Is a 10-year mortgage right for me?
A 10-year mortgage might be the right choice for you if you’ve already paid down a lot of your mortgage and are looking to accelerate your payments. It could also be a good fit if you want the added discipline of a shorter term to make more aggressive payments each month.
Be sure to also consider how your repayment would differ with a 15- or 30-year mortgage instead as you weigh your options. You can use our mortgage refinance calculator to run the numbers.
When should you refinance your mortgage?
While refinancing your mortgage could be a good choice in some cases, it isn’t right for everyone. Here are a few situations where refinancing could be the right move:
- Lower your interest rate. If you can qualify for a lower interest rate on your mortgage, refinancing could be a good idea. Reducing your rate by even just 1% is likely worth it for the savings.
- Shorten your term. Refinancing to a shorter term can save you a lot of money on interest charges. Many lenders also offer better rates to borrowers who opt for shorter terms. Just remember that this also means your monthly payments will increase.
- Switch your interest rate type. If you want to switch from a fixed rate to a variable rate or vice versa, you can do so through refinancing.
How much does it cost to refinance a mortgage?
If you opt to refinance your mortgage, you can generally expect to pay 2% to 5% of your outstanding principal balance in closing costs. Here are some of the potential fees that could be included with your refinance:
- origination fee: This is charged by some lenders as an administrative fee in return for processing a loan and usually ranges from 0.5% to 1.5% of the loan amount.
- appraisal fee: Lenders typically require an appraisal during the refinance process. You can expect to pay $300 to $500 for the appraisal of a single-family home.
- Credit report fee: A lender might pass the fee of pulling your credit report on to you. It typically ranges from $40 to $50.
Keep in mind that you might be able to lower these costs. Some strategies that could help include:
- Comparing multiple mortgage lenders and their fees.
- Negotiating closing costs with the lender.
- Asking your current lender if you’re eligible for fee waivers.
George is Digismak’s reported cum editor with 13 years of experience in Journalism