121 Mercer Street, #4W (Douglas Elliman)
Since early 2022, consumers have had ample time to consider how even a small change in mortgage rates can have a big impact. But despite higher rates, there’s one reliable way to secure a better deal and potentially save hundreds of thousands of dollars — choosing a short-term mortgage. This article explores the advantages, both short- and long-term, of locking in a shorter mortgage term.
In this article:
What is a “Short-term Mortgage”?
A short-term mortgage generally refers to any mortgage that will be paid down in full in 15 years or less, though it is sometimes defined as a mortgage that will be paid down in 10 years or less
Short-term Benefits of Short-Term Loans
There are several immediate advantages to pursuing a short-term mortgage:
- Secure a lower mortgage rate
The impact of opting for a 10 or 15 versus 30-year mortgage can be significant. For example, as of late September 2024, several large U.S. lenders were offering 15-year mortgages at 5.3 to 5.4 percent to credit-worthy applicants. By contrast, the same lenders’ 30-year mortgage rates were still 6.1 percent or higher.
Because short-term mortgages are considered less risky, pursuing a 10- or 15-year mortgage can also open up lending options that would otherwise be unavailable. - Build equity more quickly
If you're looking to build equity quickly, opting for a short-term mortgage is the most effective way. Switching from a 30-year to a 15-year mortgage will increase your monthly payments, but if it's within your budget, you'll pay down a larger portion of your principal sooner, accelerating the growth of your home equity. - Boost your credit score and credit-worthiness
Ironically, when managed properly, debt can actually improve your credit score. As long as you're not burdened by other liabilities like revolving debt, paying down your mortgage faster builds more equity, which in turn boosts youar credit rating.
Long-term Benefits of Short-term Mortgages
The long-term benefits of pursuing a 10- or 15-year mortgage are also significant and, fully leveraged, they may even help you start building a larger real estate portfolio:
- Significant cost savings
Opting for a 15- versus 30-year term is a guaranteed way to save money and invest in your future. Let’s say, you're buying a $1 million home with 80 percent financing. If you opt for a 30-year term at 6.125 percent, you'll pay almost double the cost of the home over 360 payments, or a total of $1,902,918.35. By contrast, if you opt for a 15-year term at a more advantageous mortgage rate of 5.375 percent, you'll only pay $1,243,570.21 over the mortgage’s 180 payments. That’s nearly $660,000 in savings over the lifespan of the mortgage. - Ability to re-invest
While there are many things you can do with over half a million in savings, one obvious option is to purchase an investment property that holds the potential to generate income from tenants and further grow your money over time as the property appreciates. - Ability to re-enter the market with low or no financing
Another advantage of opting for a short-term mortgage is the ability to re-enter the market as a cash-only buyer. As New Yorkers have witnessed over the past two years, when interest rates climb, cash-only deals soar. In fact, in 2023 to 2024, cash-only deals accounted for the majority of sales in Manhattan. However, avoiding the high cost of lending isn't the only reason to aspire to enter the market as a cash-only buyer. Cash-only buyers also tend to be favored by lenders, sellers, and coop and condo boards and, as a result, are naturally better positioned to ask for concessions when negotiating.
The Low Cost of Cutting a Mortgage Term in Half
While paying down a mortgage faster will increase your monthly payments, it won’t double them. For instance, on a $1 million property with 80% financing and a 30-year mortgage at 6.125%, your monthly payment would be $4,861. Opting for a 15-year term at 5.35% raises the payment to $6,484—an increase of $1,623. While this isn't a small amount, the benefits of paying about 25% more each month are substantial.
From securing better lending rates to building equity faster and positioning yourself as a future investor or cash buyer, the advantages of a short-term mortgage are well worth considering.
From securing better lending rates to building equity faster and positioning yourself as a future investor or cash buyer, the advantages of a short-term mortgage are well worth considering.
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New listings with low carrying costs to take the bite out of mortgage payments
121 Mercer Street, #4W
$3,125,000
SoHo | Cooperative | 2 Bedrooms, 2.5 Baths | 1,804 ft2Total Monthlies: $1,835
121 Mercer Street, #4W (Douglas Elliman Real Estate)
72 Horatio Street, #3S
$2,998,000
West Village | Cooperative | 2 Bedrooms, 2 Baths | 1,250 ft2Total Monthlies: $1,890
72 Horatio Street, #3S (Corcoran Group)
118 Wooster Street, #PH6C
$2,650,000
SoHo | Condominium | 2 Bedrooms, 1.5 Baths | 1,300 ft2Total Monthlies: $1,999
118 Wooster Street, #PH6C (Platinum Properties)
129 West 131st Street, #2
$1,995,000
Harlem | Condominium | 3 Bedrooms, 3.5 Baths | 2,157 ft2Total Monthlies: $941
129 West 131st Street, #2 (Serhant LLC)
38 East 85th Street, #10E
$1,845,000
Carnegie Hill | Cooperative | 2 Bedrooms, 1.5 BathsTotal Monthlies: $1,060
38 East 85th Street, #10E (Compass)
The Corona, #51
$1,675,000
Riverside Dr./West End Ave. | Condominium | 2 Bedrooms, 2 Baths | 1,162 ft2Total Monthlies: $1,485
The Corona, #51 (Time Equities Inc)
406 Degraw Street, #3
$1,415,000
Carroll Gardens | Condominium | 2 Bedrooms, 2 Baths | 920 ft2Total Monthlies: $593
406 Degraw Street, #3 (Compass)
2 Charlton Street, #5G (Byson Real Estate Company LLC)
Kalahari Harlem, #A313
$1,200,000
Harlem | Condominium | 2 Bedrooms, 2 Baths | 1,150 ft2Total Monthlies: $1,126
Kalahari Harlem, #A313 (Compass)
719 Carroll Street, #2L
$1,195,000
Park Slope | Cooperative | 2 Bedrooms, 1 BathTotal Monthlies: $650
719 Carroll Street, #2L (Corcoran Group)
Cassa, #31C (Corcoran Group)
106 Jefferson Avenue, #2
$1,095,000
Bedford-Stuyvesant | Condominium | 2 Bedrooms, 2 Baths | 896 ft2Total Monthlies: $494
106 Jefferson Avenue, #2 (Douglas Elliman Real Estate)
Rosa Parks Condominium, #5A
$999,000
Harlem | Condominium | 2 Bedrooms, 2 Baths | 1,053 ft2Total Monthlies: $1,248
Rosa Parks Condominium, #5A (Brown Harris Stevens Residential Sales LLC)
East River Coop, #H1101
$995,000
Lower East Side | Cooperative | 3 Bedrooms, 1 BathTotal Monthlies: $1,339
East River Coop, #H1101 (Brown Harris Stevens Residential Sales LLC)
583 Putnam Avenue, #2
$950,000
Bedford-Stuyvesant | Townhouse | 2 Bedrooms, 1 Bath | 900 ft2Total Monthlies: $523
583 Putnam Avenue, #2 (Keller Williams Realty Empire)
170 East 90th Street, #5W
$950,000
Carnegie Hill | Cooperative | 2 Bedrooms, 2 BathsTotal Monthlies: $1,203
170 East 90th Street, #5W (Yoreevo LLC)
315 East 77th Street, #6C
$925,000
Lenox Hill | Cooperative | 2 Bedrooms, 1 Bath | 925 ft2Total Monthlies: $1,813
315 East 77th Street, #6C (Akam Sales & Brokerage Inc)
307 East 8th Street, #4B
$880,000
East Village | Cooperative | 2 Bedrooms, 1 BathTotal Monthlies: $1,176
307 East 8th Street, #4B (Highline Residential LLC)
15 West 84th Street, #1D
$850,000
Central Park West | Cooperative | 3 Bedrooms, 1 Bath | 905 ft2Total Monthlies: $1,795
15 West 84th Street, #1D (Corcoran Group)
345 East 86th Street, #11C
$750,000
Yorkville | Cooperative | 2 Bedrooms, 1 BathTotal Monthlies: $1,746
345 East 86th Street, #11C (Berkshire Hathaway HomeServices New York Properties)
2322 Adam Clayton Powell Jr Boulevard, #2B
$695,000
Harlem | Condominium | 2 Bedrooms, 1 Bath | 800 ft2Total Monthlies: $1,012
2322 Adam Clayton Powell Jr Boulevard, #2B (Nest Seekers LLC)
40 Tiemann Place, #4A
$529,000
Morningside Heights | Cooperative | 2 Bedrooms, 1 BathTotal Monthlies: $515
40 Tiemann Place, #4A (Corcoran Group)
Would you like to tour any of these properties?
Just complete the info below.
Or call us at (212) 755-5544
Would you like to tour any of these properties?
Contributing Writer
Cait Etherington
Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.
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