Though the traditional 30-year mortgage for a home is the most standard, shorter loan terms are also available, including a 10-year mortgage option. This more niche loan term can save you a significant amount of money over the long term if you can afford the hefty monthly payment.
A 10-year mortgage is less common than other kinds of mortgages, but it has some unique advantages. Though your monthly payments will be higher than other mortgage types, the rates are slightly lower than conventional 30-year mortgage rates. Here’s everything you need to know about a 10-year mortgage, how it works and how to find the lowest mortgage rates possible.
What is a 10-year mortgage?
A 10-year mortgage works exactly the same way as other kinds of mortgages, but instead of repaying your mortgage in 15 or 30 years, you’ll repay it in 10. This might make sense when buying a home if you can afford a larger monthly payment, want to save big in interest payments and don’t want to have to pay off your mortgage over several decades. You can apply and qualify for a 10-year mortgage the same way you do with other types of mortgages.
While 10-year mortgages aren’t that popular, the homebuying process won’t change whether you have a 10-or a 30-year mortgage. You should expect to pay all the same fees, including closing costs and origination fees.
It’s important to speak with multiple lenders and do your research before choosing one. Interviewing more than one lender will help you find the lowest rate and fees for your financial situation. The more lenders you gather information from, the better your chances of securing a lower rate.
10-year fixed-rate mortgage rate trends
As of April 12, 2023, the average rate for a 10-year mortgage is 6.34%, while the average rate for a 30-year mortgage is 6.87%, close to a 20-year high. Since the beginning of last year, mortgage rates have consistently increased from record lows of around 3%. While it’s unclear where rates will land in 2023, inflation remains persistent, and the Federal Reserve has signaled it will continue raising rates. Even one or two percentage points can significantly affect the interest you pay on your mortgage.
Current mortgage rates
| Product | Interest rate | APR |
|---|---|---|
| 30-year fixed-rate | 6.94% | 6.96% |
| 30-year fixed-rate FHA | 6.15% | 7.07% |
| 30-year fixed-rate VA | 6.32% | 6.43% |
| 30-year fixed-rate jumbo | 6.99% | 7.01% |
| 20-year fixed-rate | 6.84% | 6.87% |
| 15-year fixed-rate | 6.27% | 6.30% |
| 15-year fixed-rate jumbo | 6.36% | 6.37% |
| 5/1 ARM | 5.77% | 7.45% |
| 5/1 ARM jumbo | 5.67% | 7.38% |
| 7/1 ARM | 6.47% | 7.35% |
| 7/1 ARM jumbo | 6.68% | 7.25% |
| 10/1 ARM | 6.73% | 7.28% |
| 30-year fixed-rate refinance | 7.07% | 7.09% |
| 30-year fixed-rate FHA refinance | 6.23% | 7.15% |
| 30-year fixed-rate VA refinance | 6.39% | 6.60% |
| 30-year fixed-rate jumbo refinance | 7.15% | 7.16% |
| 20-year fixed-rate refinance | 7.00% | 7.03% |
| 15-year fixed-rate refinance | 6.34% | 6.37% |
| 15-year fixed-rate jumbo refinance | 6.40% | 6.42% |
| 5/1 ARM refinance | 5.71% | 7.31% |
| 5/1 ARM jumbo refinance | 5.64% | 7.08% |
| 7/1 ARM refinance | 6.38% | 7.37% |
| 7/1 ARM jumbo refinance | 6.59% | 7.27% |
| 10/1 ARM refinance | 6.79% | 7.32% |
We use information collected by Bankrate, which is owned by the same parent company as CNET, to track daily mortgage rate trends. The above table summarizes the average rates offered by lenders across the country.
Pros of a 10-year mortgage
- Lower interest rate: You pay a lower interest rate for a 10-year mortgage than other types of mortgages because the bank is taking less risk loaning you money over a shorter period. Plus, you cut down the total interest you’ll pay overall.
- Pay off your loan faster: You save tens of thousands of dollars over the life of your loan by paying it off faster.
- Faster path to equity: With larger monthly payments, you’ll own your home outright sooner than you would with other longer mortgage terms.
Cons of a 10-year mortgage
- High monthly payments: Because of the shorter term, monthly payments can be two to three times higher than on a 30-year mortgage. That might be too expensive for many people. If you can’t afford such a high monthly payment, a 10-year mortgage may not be the best choice.
- May limit your price range: A home that might be affordable with a 30-year mortgage may become prohibitively expensive with a 10-year mortgage.
- Reduced savings: If you’re allocating a larger portion of your monthly spending on a mortgage payment, it may curb your ability to pay off other debt and save. That could squeeze you in the case of an emergency or if your financial situation changes.
Should you get a 10-year mortgage?
A 10-year loan will usually come with a lower interest rate; therefore, you’ll pay less in interest over time. But your monthly mortgage payment will be higher. It makes the most sense to go with a 10-year mortgage if you satisfy the following conditions:
- You can afford the larger monthly payments.
- You have the funds to pay off the home and other pressing matters in case of an emergency.
- You want the lowest possible interest rate.
- You want to build your equity quickly.
How to get the best 10-year mortgage rate
The best rates are reserved for applicants with excellent credit. That means you’ll need a history of making on-time payments and a low debt-to-income, or DTI, ratio. It will help if you haven’t opened or closed any credit accounts recently. If you have excellent credit, you’ll be in a good position to comparison shop rates with a variety of lenders. Some may offer discounts if you sign up for auto-pay each month.
Alternatives to 10-year mortgages
- 10-year mortgage vs. 30-year mortgage: A 10-year mortgage will make the most sense if you can afford a larger monthly expense and can navigate a financial bump if something unexpected comes up. You’ll benefit from the lower interest rate and pay off your home sooner compared with a 30-year mortgage. However, a traditional 30-year mortgage usually makes sense for most people since it lets you access financing for a more expensive home, spreading the monthly payments over three decades. While it takes longer to build equity, you’ll be able to get into a house on a budget you can afford.
- 10-year mortgage vs. 15-year mortgage: A 15-year mortgage isn’t all that different from a 10-year mortgage, except that you have five additional years to pay it off. You’ll still benefit from a lower interest rate than a 30-year mortgage and pay less interest over the shorter loan term. If you can’t reasonably afford a 10-year mortgage, a 15-year mortgage may be a good compromise.
- Government-backed loan: If you don’t qualify for a 10-year mortgage, consider programs that help first-time homebuyers or lower-income buyers purchase a home, such as an FHA loan, which can require a down payment as small as 3.5% for qualified applicants, or a USDA loan which will accept a credit score as low as 640.
How do you qualify for a 10-year mortgage?
- Income: Income requirements will be more strict about making sure you can afford to make the higher monthly payments. If you don’t have a high enough salary, you may be denied a 10-year mortgage as opposed to with a longer loan term.
- Credit score: The required minimum credit score will also be more stringent to ensure you can afford your mortgage and aren’t at risk of defaulting.
- Other factors: Make sure you have all your financial documents like tax returns and pay stubs in order because the lender will factor in almost every aspect of your financial life to determine whether or not you can pay back the loan. In addition to your income and credit score, your current debt and your loan-to-value ratio affect the rate a lender will offer you.
FAQs
You can get a 10-year fixed mortgage rate or an adjustable-rate mortgage (ARM). Remember that ARMs can fluctuate so when interest rates rise, you might end up paying more than those who have a fixed rate mortgage.
Over the life of the loan, a 10-year mortgage is less expensive than loans with longer terms. You should be able to get a lower interest rate and you’ll pay less in interest, because you’ll pay it off faster.
Qualifying for a 10-year mortgage has less to do with your income and more to do with the price of the home. The sale price will determine your monthly payment. Knowing what you can afford to spend on a monthly payment will help you figure out your budget
Anything at or below the national average is generally considered a good mortgage rate. For a 10-year fixed-rate mortgage, the average rate is currently 6.34% as of April 12, 2023, according to CNET’s sister site Bankrate.
Other mortgage tools and resources
You can use CNET’s mortgage calculator to help you determine how much house you can afford. CNET’s mortgage calculator takes into account things like your monthly income, expenses and debt payments to give you an idea of what you can manage financially. Your mortgage rate will depend in part on those income factors, as well as your credit score and the ZIP code where you are looking to buy a house
