10 Year Fixed Refinance Mortgage: What You Need to Know

Most homeowners choose to pay off their mortgage over 30 years. But sometimes, especially when refinancing an existing loan, borrowers opt for a shorter repayment period. 

While 15 years is a common alternative, some consumers may want to refinance into a 10-year fixed mortgage to pay off their loan even sooner.

Can I Get a 10-Year Fixed-Rate Mortgage?

Yes, it’s entirely possible to get a fixed-rate mortgage (FRM) with a term as short as ten years. As a matter of fact, that’s the minimum length that conventional guidelines allow. 

While borrowers usually opt for the standard 30-year mortgage, you can do a 10-year fixed-rate refinance through most residential lenders as long as you qualify.

Reasons to Choose a 10-Year Fixed Refinance

Why would someone want to shrink their mortgage repayment period to ten years? It turns out that it may be an intelligent move for borrowers in the position to do so.

Build Equity Faster & Own Your Home Sooner

Every payment you make on a 10-year mortgage builds more equity and puts you closer to full ownership than with a longer-term loan. Compared to a standard 30-year mortgage, a 10-year refinance will have your home paid off in a third of the time.

Assuming a $300,000 starting balance, here’s how much equity you would build after paying on your mortgage for five years (60 payments) with a 10-year loan at 6% interest compared to a 30-year loan at 7% interest.

	Monthly Payment	Loan Balance (6th Year)	Built Equity*
10-Year FRM (6%)	$3,331	$172,300	$127,700
30-Year FRM (7%)	$1,996	$282,400	$17,600

As you can see from the chart, a 10-year refinance would build you more than seven times the equity of a 30-year loan after making five years of payments.

What would this scenario look like after you have made your payments for ten years? You would have your 10-year refinance paid off, but a $300,000 30-year loan would still have a balance of over $257,400.

Eligible for Lower Interest Rates

Lenders generally offer lower interest rates on shorter-length mortgages. The difference can be considerable if you’re comparing a 10-year to a 30-year mortgage. At the time of writing, average refinance rates were more than 1% lower for a 10-year loan than a 30-year.

Pay Less Lifetime Interest

Combining the benefits of a lower interest rate and fewer total payments means you will spend far less on interest with a 10-year refinance.

Using our example of the $300,000 loan from before, a 30-year mortgage at 7% would result in around $418,500 total interest paid over the life of the loan. With a 10-year mortgage at 6%, that lifetime interest drops to under $99,700.

Downsides of a 10-Year Fixed Refinance

A 10-year fixed refinance can be a wise financial decision if you’re prepared for the rapid repayment. However, these shorter-term loans aren’t for everyone. Here are a few downsides to a 10-year mortgage that you should definitely consider first.

High Monthly Payments

Because you’re repaying your principal balance in a third of the time of a standard loan, your monthly payments are going to be larger. They won’t be triple since you’re paying far less interest, but the difference can still impact some budgets.

Here are the monthly principal and interest payments on a 10-year mortgage at 6% and a 30-year mortgage at 7% for various refinance amounts.

Loan Balance	10-Year (6%)*	30-Year (7%)*
$200,000	$2,220	$1,331
$250,000	$2,776	$1,663
$300,000	$3,331	$1,996
$350,000	$3,886	$2,329
$400,000	$4,481	$2,661
$450,000	$4,996	$2,994
$500,000	$5,551	$3,327
$550,000	$6,106	$3,659
$600,000	$6,661	$3,992
$650,000	$7,216	$4,324
$700,000	$7,771	$4,657
$750,000	$8,327	$4,990

Less Flexibility in Your Budget

Higher monthly payments mean you’ll put a more sizable portion of your budget toward your mortgage. While you might be able to make the payment now, would you be in as comfortable of a position if you had a decrease in disposable income in the future?

A 10-year mortgage offers less flexibility in your budget in the event that your income drops or other expenses rise.

Harder to Qualify For

Since the larger payment takes up more of your monthly budget, qualifying for a 10-year mortgage can be difficult.

Conventional lenders will typically allow your housing expense to account for up to 36% of your income and your overall debt to be as high as 45%.

But the total housing expense includes more than just principal and interest. It also takes into account taxes, insurance costs, and any required homeowners association dues.

Here’s a chart showing the income you would need to qualify for various 10-year fixed mortgages at 6%, assuming annual property taxes are equal to 1% of the loan, annual homeowners insurance is equal to 0.75%, and mortgage insurance has an annual premium of 0.38%.

Loan Balance	10-Year P&I (6%)	Total Payment (PITI)	Monthly Required Income*
$200,000	$2,220	$2,575	$7,153
$250,000	$2,776	$3,219	$8,942
$300,000	$3,331	$3,863	$10,731
$350,000	$3,886	$4,507	$12,519
$400,000	$4,481	$5,151	$14,308
$450,000	$4,996	$5,795	$16,097
$500,000	$5,551	$6,439	$17,886
$550,000	$6,106	$7,082	$19,672
$600,000	$6,661	$7,726	$21,461
$650,000	$7,216	$8,370	$23,250
$700,000	$7,771	$9,014	$25,039
$750,000	$8,327	$9,658	$26,828

Who Might Consider a 10-Year Refinance?

We’ve gone over how a 10-year fixed loan will cost you much more each month but can save you a ton in lifetime interest. But not all homeowners will want to refinance to such a short term. 

Who, exactly, might consider a 10-year refinance? Most often, this will be someone:

• with a small loan balance
• with a comparatively large income
• doing a cash-out refinance on a property they own free and clear
• that has already spent many years paying down their mortgage
• who is nearing retirement and budgeting for a fixed income

Don’t Get Confused by 10-Year Adjustable-Rate Mortgages

You’ll frequently see adjustable-rate mortgages (ARMs) advertised as 10-year. Unlike a 10-year fixed-rate loan, however, these adjustable mortgages do not extinguish your debt in ten years.

Instead, the 10-year phrase refers to the length of the initial fixed-rate period. In most cases, the full loan term will still be 30 years.

You will most commonly find 10-year adjustable loans as 10/6 ARMs, meaning that after the 10-year fixed period, the rate will adjust every six months for the remaining 20 years. Some lenders may also offer 10/1 ARMs, with rates that adjust annually following the fixed period. However, these loans have become less common.

Alternatives to a 10-Year Fixed-Rate Mortgage

A 10-year fixed-rate mortgage is not your only option for paying your loan down sooner. In fact, you could do a refinance for any term length and potentially have the same payoff date by making extra principal reduction payments.

But by having a longer loan with a lower required minimum, you’re able to pay off extra as you see fit. If you need to use the additional funds elsewhere one month, you aren’t locked into the higher amount.

Here are some typical refinance lengths, what their payments might look like in our sample scenario, and how much extra you would need to pay each month to extinguish the loan balance in ten years.

1. 15-Year Fixed-Rate Mortgage

With a $300,000 15-year mortgage at 6.25%, the minimum monthly payment would be $2,572. You could pay the loan off over ten years by putting in an extra $800 per month. This would cost you $41 more than a 10-year loan and $4,300 extra in lifetime interest payments.

2. 20-Year Fixed-Rate Mortgage

Assuming a 20-year fixed loan at 6.5%, the monthly principal and interest cost would be $2,237 on a balance of $300,000. To pay off the loan in ten years, you would need to add an extra $1,175 to each payment. This would total $81 additional per month and $8,800 extra paid over the life of the loan.

3. 25-Year Fixed-Rate Mortgage

With a 25-year loan at 6.75%, the monthly payments on a $300,000 balance would be $2,073. To reach a 10-year repayment, you would need to contribute an extra $1,375 monthly. This would be $117 more than a 10-year loan and $13,500 additional lifetime interest.

4. 30-Year Fixed-Rate Mortgage

A 30-year mortgage for $300,000 at 7% would have monthly payments of $1,996. To pay off the loan after ten years, you would need to add an extra $1,500 per month. This would cost $165 more monthly than a 10-year loan and total $17,600 in extra interest.

Refinancing Into a 10-Year Fixed-Rate Mortgage

Not all homeowners will want or qualify for a 10-year fixed refinance. However, repaying your loan in such a short period could save you hundreds of thousands of dollars in interest payments compared to a longer refinance term.

If you think you might be prepared to take on a 10-year mortgage, check out the current refi rates for your area and apply with a reputable lender to receive a loan estimate customized to your unique refinancing needs.