Mortgage blog: When you should consider a mortgage that is longer than 25 years
If you've ever taken out a new mortgage you probably took it over a 25-year term. 25 years has become the accepted ‘standard' length for a new mortgage and you've probably been quoted for your home loan assuming that term.
However, according to mortgage brokers, increasing numbers of borrowers are asking for mortgages of 30 or 35 years in order to keep their repayments down. So, should you consider a longer mortgage term? We look at the pros and cons and identify two situations where a longer term may work for you.
Long-term mortgages offer lower repayments but higher total interest costs
One of the main advantages of taking out your mortgage over a longer term is that you will reduce your monthly repayments. According to the Daily Mail, if you borrow £190,000 at 5.5% over a 30-year term you would pay £1,078 per month - £89 lower than if you took the loan over the traditional 25-year term.
If you choose a 35-year term your monthly cost would be £1,020 - saving you £147 a month or £1,764 a year on a traditional deal.
Keith Osborne, editor of Whathouse.co.uk, says: "While your monthly repayments will be cheaper under a longer-term deal, you will pay more interest in total. In the example above you'd pay around £39,000 in additional interest if you take the mortgage over 30 years rather than 25 years."
So, when should you consider a longer-term mortgage? Here are two suggestions.
1. When you're a first-time buyer and you need to minimise your costs
When speaking to a mortgage broker about your mortgage, if your repayments take up a high proportion of your income it may result in you being declined for a loan. However, taking the mortgage over a longer term can make the repayments more affordable and increase your chances of being accepted.
Once you're established in the property and your repayments become more comfortable you can then consider shortening the term.
2. If you need to reduce your repayments for a temporary period
If you find yourself in a position where meeting your repayments is tough - perhaps one of your household earners loses their job or you start a family - extending your mortgage term can bring your repayments down.
Osborne adds: "Most lenders will let you change your mortgage term for a small admin fee. However, you should always try to re-establish your original term as soon as you can afford to."
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