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10 Year Fixed Mortgage - The 10 Year Fixed Mortgage: Pay Off Your House in 120 Months - The Problem with Long-term Mortgages

loan life monthly payment

Everywhere on the mortgage scene, you hear people talking about mortgages that will take you almost half your life to repay. The lowest you usually hear of is a 15 year mortgage, then the 30 year mortgages are one of the most common, and recently even 40 year mortgages are becoming popular! In today’s world, it’s virtually unheard of to pay off your home in only 10 years or less. But just because it’s unheard of doesn’t mean it’s not a good idea! 10 year fixed mortgages provide many benefits for those who are willing to step up to the plate and get serious about truly owning their homes.

The Problem with Long-term Mortgages

When they sign up for a mortgage, many people are fixated too much on the monthly payment amount. We have the idea that as long as the monthly totals are as low as possible, we must be saving money. That combined with an urge to buy as much house as we can afford has sunken many a homeowner into a pit of debt and struggle that takes years to get out of.

But even if you can afford your monthly payments just fine, have you ever actually looked at the total amount that you will spend over the life of a long-term loan? Let’s try a simple $100,000 loan on a 30 year fixed rate with 5% interest. Over the course of 30 years, you will have paid about double the original amount in pure interest! And that’s not including taxes or mortgage insurance. If you include those, you will likely pay closer to $250,000. It may not seem so bad month to month, because you have that miniaturized payment. But when stretched over 30 years, the results are astronomical!

Benefits of a 10 Year Fixed Mortgage

For starters, a 10 year fixed mortgage is fixed, so you will know exactly how much you will have to pay every month of the loan. The 10 year also tends to get better rates than a 30 year or even a 15 year mortgage. But even if the rate was exactly the same, you’d come out on top because time is on your side. Let’s look at that same $100,000 loan with the same 5% interest rate, this time spread over 10 years. Instead of paying another $100,000 in interest, you pay a relatively measly $30,000!

Another benefit is quick equity-gain in your home. 30 and (heaven forbid!) 40 year loans gain equity at a snail’s pace compared to a 10 year loan. Because remember, you always pay the interest first! The principal-heavy payments only begin after half the life of the loan.

Of course the monthly payments are higher than with longer loans, but do you think it will be worth it 10 years from now (or maybe sooner!) when you pay your last house payment? Imagine that day. You’re writing the last check on your house, and you still have plenty of life left to enjoy it! Now imagine the same day 10 years from now if you had gone with the 30-year instead. You’re not even at the halfway point! Yes, it’s another 20 years of the same “little” payment, month after month after month.

Try the math for yourself – use a simple mortgage calculator like the one at www.mortgagecalculator.org, or try BankRate.com’s more advanced version. Before committing the next 30 years of your life to financial servitude, we challenge you to take a good look at your finances and what you really need from a house. Time flies, and in 10 or 15 years you could be kicking yourself for not thinking this thing through!

Just about any major lender can accommodate a 10 year fixed mortgage, so, like with any loan, shop around to find the best rates. Whatever you end up going with in the end, just remember: the monthly payment is not all there is to the picture!

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