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What will mortgage interest rates be at in ten years?
Posted by James on June 15, 2010 in Home Loans | ∞
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I am purchasing a home, owner financed for 10 years, with a balloon payment. I will then need to get a federally backed loan (bank loan). What do you think interest rates will be in 10 years? I will have paid down the house so shouldn’t need 10% or 20% down.
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I am purchasing a home, owner financed for 10 years, with a balloon payment. I will then need to get a federally backed loan (bank loan). What do you think interest rates will be in 10 years? I will have paid down the house so shouldn’t need 10% or 20% down.
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6 Comments
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My guess would be around 8% After looking at trends. YOU NEVER KNOW THOUGH! Plan for the worst…be ready for 12%
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They are quite low now, so you should expect them to do nothing but go up in the future. They could go up and then back down to current levels over 10 years, but I think it is unlikely that you will see them get much lower than they are today.
You won’t have paid the house down a whole lot in only 10 years. The majority of your payment in the early years goes to interest and very little to principal. So you have a logic flaw there. Your only hope in this regard is that the value of the home increases substantially over those 10 years, and while it may I would not base my financial planning on that happening (that’s what got a ton of people in trouble lately).
I’m assuming you are not in a position to make the 10-20% down payment at this time; if you were I’d recommend getting a bank loan now at today’s rates for a fixed rate, and not have that balloon hanging over your head; 10 years will fly by and if you see rates creeping (and home values barely moving, as they usually do) you are going to feel squeezed.
Best thing you can do is live way below your means for a while and save as much cash as you can, so you can get an 80% bank loan and out of this balloon loan as soon as you can, no matter what the rates are at that time. You will then be protected from future increases, and can always modify or refinance if they later drop.
Whatever you do, forget about your “paid down” assumption and reformulate your plans without that because is isn’t going to happen in 10 years or less.
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