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Like a 10-year fixed versus a 5-year variable? Basically, what would be a prediction for interest rates over the next 5-10 years?
We may only live there for about 5 years or so and then upgrade, will that affect the decision?

8 Thoughts on At current interest rates, is it better to get a longer term fixed-rate mortgage or a shorter variable one?
  1. Reply
    June 10, 2011 at 12:36 am

    The prediction for interest rates over the next 5-10 years is sketchy.

    Or as I like to say in class, My interest rate crystal ball is a bowling ball, three dark holes take your pick, unsure, don’t know, can only guess.

    Get a 30 year fixed. Why gamble with your home. The rates are good enough on those right now.

  2. Reply
    Mr. Hand
    June 10, 2011 at 1:27 am

    The answer comes down to what your plans are. If you think you will live in that house for more than 5 years, a fixed rate may be the way to go. However, even though the Real Estate market is soft, appreciation should be at least 3% per year. Therefore, with an interest only, you can save a few hundred dollars on your payment per month while gaining money in equity.

    Also, for the first few years, even though the payment is fixed, you are only paying something like $ 200 per month in principle. That means that you are not paying down your mortgage, but your payment is still high.

    Bottom line, if you see yourself upgrading on the home in a few years, save the money and go with an interest only.

  3. Reply
    Todd S
    June 10, 2011 at 1:32 am

    A lot of people think there will be a mini boom in 2008, although nothing is for sure. But rates are pretty cyclical, so chances are they will improve within 5 years. A 5yr arm is a decent choice if it’s much better than a 10yr, but chances are the difference in rate is only .125 to .25%. So it’s worth looking into both options.

    It also depends on what you plan on doing with the home. If you want to stay there for good, or move/upgrade within 5 years.

    Either way, the pricing on 5 or 10yr should be roughly the same.

    Good luck.

    Learn more at

  4. Reply
    June 10, 2011 at 1:32 am

    Interest rates will never grow at a pace that will outperform real estate. The question is not what interest rates will do in 10 years (because nobody has a crystal ball and everything else is a guess)…the question is what your goal is for the property…short or long term.

    Here is some additional info. Hope this helps.

  5. Reply
    June 10, 2011 at 1:58 am

    You could check out this site for current information and articles on this.

  6. Reply
    June 10, 2011 at 2:06 am

    never get a varible with a mortgage…..

    If you plan on a stay between 5 to 10 years…don’t get a 30 year fix rate…in those first 5 years or so,your paying mostly interest on the mortgage..So when you decided to sell..You’ll still have loads of princible left…

    Go with a 15 year fixed rate…The equity you’ll gain in those ten years compared to a 30 year is incredible..Its money in the bank..

  7. Reply
    June 10, 2011 at 3:03 am

    10 Year fixed is the same as a 30 year fix. If you want a variable than go with a 30 year Fix Interest Only Option. Best of both worlds because you keep the fixed rate for the term of the loan, yet

    1-10 interest only or full principal and interst payments
    11-30 principal and interest only payment.

    Usually there is no cost to this type of loan if you have excellent credit and it save you money from having to refinance in 5 years if you decide to stay there longer.

    Good luck and if you want me to review your Good Faith Estimate I will do it for free

  8. Reply
    June 10, 2011 at 3:34 am

    With inverted yield curves, ARMs don’t really make much sense right now….rates on a 10 YR ARM are the same as a 30 yr.

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