5 or 10 year mortgage deal?

[TomT]

Hi! My current fixed rate deal is coming to an end by the end of this month. I have two options, 5 years at 2.64% and 10 years at the rate 3.74% and I'm going to stay on a fixed rate as I'm more comfortable with that. On one hand I'm thinking that 10 years is safer, however I'm also thinking that 10 years is too long. If I went for 5 years at a lower mortgage rate, I could overpay every month up to what I'm paying at the moment as I'm comfortable with that amount. So what would you do, go for a higher rate and know you are safe for 5 extra years or go for the lower rate and overpay every month but with the risk of it possibly coming to an end when rates back up?

[Frugalbigmama]

I would go for the 5 year and pay the crap out of it!

[super807]

Extra payments on a mortgage go to the principal. Regular payments on a mortgage go to interest and principal. If you were to take the five year term and make extra payments equal to what you would pay with the 10 year rate, you will reduce your amortization period faster than if you took the 10 year term. Of course this is dependant of your specific mortgage conditions pertaining to extra payments and your discipline to actually make the extra payments.

Going for a five year term gives you more flexibility if you find yourself needing to break your mortgage before the term is up.

[dougboswell]

One benefit of a 10 year mortgage is that if you have to break it after 5 years you only pay 3 months interest as a fee.

[dougboswell]

A good read on10 year mortgages
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business.financialpostcom/personal-finance/mortgages-real-estate/a-great-rate-for-a-bad-mortgage-the-10-year-mortgage-is-near-an-all-time-low-but-is-it-a-good-idea

[MortgageQueen]

Hi! My current fixed rate deal is coming to an end by the end of this month. I have two options, 5 years at 2.64% and 10 years at the rate 3.74% and I'm going to stay on a fixed rate as I'm more comfortable with that. On one hand I'm thinking that 10 years is safer, however I'm also thinking that 10 years is too long. If I went for 5 years at a lower mortgage rate, I could overpay every month up to what I'm paying at the moment as I'm comfortable with that amount. So what would you do, go for a higher rate and know you are safe for 5 extra years or go for the lower rate and overpay every month but with the risk of it possibly coming to an end when rates back up?

Hi Tom,
What you may want to do is talk to a mortgage professional (preferably a seasoned broker) that will help you analyze your complete financial picture, including your future goals. Generally one of the main reasons people pick 10 year mortgages is if they are on quite a restrictive fixed income and they can't afford to take any chances.

Likely there are better options for you. 2.64% is not a bad rate, but you could probably do slightly better for a 5 year fixed term. A word of caution. . .the mortgages/rates that are substantially lower are likely discount products that are limited in the features they offer. These products can be a trap under many circumstances, so please beware of any flashy offers of low rates.

Feel free to post more info on your situation or pm me if you'd like. Best wishes!

[bobbyreyes]

I would advice you to go to a mortgage professional. But I personally think to go with 5 years mortgage.

[John Rivers]

5!!! just get it done. You'll end up spending much more over 10 years. Suffer now and enjoy later!!! The 5 year rate is already pretty good. 2.64% is a pretty good deal. Delaying gratification is the key to success!!

[TomT]

Thanks guys for the advice