Would a 10-year mortgage catch your interest as a consumer? Would it be any help to you?
A ten-year mortgage has many advantages. It would captivate many consumers, banks, and financial companies.
In the end, it is a matter of preference and risk tolerance. For this reason, it has the highest insurance premium. Yet, it appears to be considerably less expensive these days because of its floating-rate structure.
Let us understand more about the 10-year mortgage by knowing what its benefits are:
Benefits of a 10-year mortgage:
1. Lower Rates
A 10-year mortgage is a fantastic loan option for anyone looking to buy a home in Canada. The interest rate on a 10-year mortgage is lower than most other types of mortgages. It is an ideal option for homebuyers who want to buy a house without the stress of inflation or market changes.
2. Investment stability
A 10-year home mortgage is the most stable type of real estate investment. You can pay back a 10-year mortgage loan regardless of the market value of your home while selling it. If you have solid credit and want to stay in your home for a long time, this sort of mortgage is perfect for you.
3. Guaranteed rate for the entire period
A 10-year mortgage offers certainty, security, and flexibility. Depending on your future financial goals, if you choose a longer-term, the lender will not change the rate at which the lender offered the loan for any reason. The lender will not charge you more for an extension if you secure a new loan at the advertised rate.
4. Predictability helps investment
The greater predictability improves investments because you know what you will expect in the future. You’ll be able to invest your money efficiently and be more confident that your efforts will bear fruit. This way, you can even plan to buy a new real estate property for investments.
Why get a 10-year mortgage over a 5-year, 20-year, and 25-year mortgage?
Your interest rate has a tremendous impact on your mortgage payments. Depending on the market conditions, different lenders offer different rates, but as the term length increases, the rates increase too.
If you get a 5-year mortgage, you can take advantage of a lower interest rate while signing up. But this also means that your mortgage renewal gets sooner. And so, you might have to face the increased interest rate.
Having a 20-year mortgage, you do not have to pay off extra interest like for the 25-year mortgage, and you do not have to face the too-high monthly payments. But you will need to prove you have an excellent credit history and sufficient income.
When you put less than 20% of your down payment, the maximum amortization period is 25 years. But you need to make higher mortgage payments every month and pay more interest over the life.
So, if compared to all the above mortgage periods, the best way for you to go might be the 10-year mortgage.
Find the optimal mortgage term for your financial situation, and you will be better prepared to know what lenders offer. Weigh the pros & cons of each product/scenario to arrive at the best selection. Explore our blog and find more about different mortgages in Canada.