skip to content

10 vs 20 vs 30 Year Fixed Mortgages: Which to Choose?

keys in the front door of a new home purchased with a fixed rate mortgage

“The one that fits you best” is too simple an answer to be useful but, with White River Credit Union as their key financial partner, members often find it simple to achieve.

What is a Fixed-Rate Mortgage?

Fixed-rate mortgages are just what they say, a home loan in which you and the lender agree on the interest rate by contract and it doesn’t change for the life of the loan. By contrast, a variable-rate mortgage has built-in flexibility, the lender adjusts the rate at pre-determined periods based on outside factors which can work in the borrower’s favor or not.

What are the Differences Between 10-, 20-, and 30-Year Mortgages?

Decades, literally. And during every year of those decades, you pay interest. Shorter loans have larger payments, but those larger payments are more principle which is (one might say) your money versus interest which is (one must say) bank money. On a 30-year mortgage for $250,000 at 3%, you’ll pay $1054 per month, $379,440 in total. On a 10-year mortgage, you’ll pay $2414 per month, $289,680 in total. You’d save $89,760 — that’s the equivalent of almost two years’ average annual household income in the Enumclaw area.

The difference, then, is what you can afford. Short-term loans have higher payments and, if you can swing them for the full term of the loan, you’re out of debt sooner. Long-term loans have lower payments, meaning you have more money in your monthly budget for other things.

If you’re paying 3% on the mortgage but you find an investment that pays 5%, you earn more in dividends than you pay in interest, you make a profit. If you work in an unpredictable industry, the lower payment means you can change jobs to a lower paying position (if necessary) with less risk to your overall financial stability. If you expect to be in the house briefly, the higher payment means more equity when you next purchase. And so on, through a lot of possibilities.

How Can I Get Help with My Mortgage?

The Enumclaw economy has been strong in the past couple of years. Home sales are strong and refinancing is an option many homeowners are considering. “The one that fits you best” is a decision you should only make after asking many questions. White River Credit Union provides many financial services — including free, confidential counseling and education through partner organizations with considerable expertise in helping individuals and families answer their financial questions. Contact us today and get started on owning your own home or strengthening your overall financial position.

Click Here for Help with Your Finances!