Find out more about longer-term mortgages
- Opting for long-term mortgages with lower monthly repayments can make it easier for first-time buyers to get a deal
- A long-term mortgage may lead to an increased overall cost when compared to a shorter-term mortgage, because you’ll typically pay more in interest all-told
- Older people may struggle to get a longer-term deal, as they'll have to provide proof they'll have the income to meet repayments in retirement
Is a long-term mortgage a good idea?
Your mortgage is likely to be the biggest financial commitment you’ll ever make.
You need to make sure you can afford the repayments and one way to make repayments smaller is to opt for a longer term on your mortgage.
A 25-year mortgage used to be the norm, but borrowers are increasingly looking into longer mortgage terms – up to 40 years – so they can get on the housing ladder.
But there are repercussions – a longer term means you’ll have to repay for longer, which could mean being mortgage-free is a long way off. It could even lead to you having to delay your retirement.
Why compare 30+ year mortgages?
The English Housing Survey found that 45% of first-time buyers in 2018-19 had a mortgage of 30 years or longer. This compares to 33% in 2008-09.
But the older you are, the harder it is to get a longer-term mortgage deal. This is because the closer to retirement you are, the more concerned lenders will be about you repaying while you still have an income.
If your chosen term does extend into your retirement, you'll need to prove to your mortgage provider that you'll have the necessary income to meet repayments.
The increasing popularity of longer-term mortgages is down to a number of reasons, rising house prices being among the main ones. ONS figures show the average UK house price has jumped almost £64,000 in ten years, to £231,855 in March 2020 from £167,878 in March 2010.
Alongside this, affordability rules introduced by the Mortgage Market Review (MMR) in 2014 made it slightly more difficult to get approved for deals that might stretch your household finances.
This is as good as it is bad for house buyers. It means you’re less likely to overstretch on your mortgage payments, but also limits you to houses within a certain price bracket.
A longer-term mortgage can reduce the amount you have to repay each month, making your mortgage more affordable.
But this only works on a short-term basis. If you can afford to take out a shorter-term mortgage without stretching your finances, consider that first.
If you want to find out what you’re likely to be able to afford, compare mortgages using the MortgageGym calculator by clicking ‘Get Quotes’ at the top of the page. The figures change depending on various factors, including term length.
You'll be able to see a number of mortgage deals and compare the cost over a term of your choice. The maximum term MortgageGym compares is 35 years.
Advantages of a longer-term mortgage
There are several advantages to taking out a mortgage with a longer term, including smaller monthly payments, affordability and flexibility.
Monthly mortgage repayments - A longer mortgage term stretches out the period within which you need to repay your mortgage.
That’ll make your monthly repayments smaller. But you need to understand that you’ll pay back overall, as you’ll be paying interest for longer.
Mortgage affordability - Thanks to the lower monthly repayments that comes with a long-term mortgage, opting for one may make a prospective lender more certain that you can afford it.
Lenders ask you to provide a number of bank statements and payslips and may also ask questions about incomings and outgoings, and your spending habits.
This could include questions about current debt, such as loans and credit cards, as well as travel costs and even gym membership. They’ll ask whether you have any children and childcare costs.
If your monthly mortgage payments are smaller, it'll be easier to show that you can afford your mortgage payments, with money left over for bills and essentials.
Mortgage overpayment and flexibility - The initial term you choose isn't set in stone. Just because you're taking out a 30-year mortgage now, doesn't mean that's how long your mortgage will end up lasting.
You could choose a shorter mortgage term if you remortgage – although that’ll increase your monthly repayments.
In fact, taking a longer mortgage for the sake of smaller monthly repayments may be the right choice for you initially, but that could easily change. For example, you might get a pay rise, you could come into money, or you may simply decide to move.
All this could mean your mortgage could change. You might even be able to start overpaying.
It's worth checking if you're allowed to overpay when you take out your mortgage. Most lenders allow you to overpay up to a certain limit, but some don’t.
Disadvantages of a longer-term mortgage
Even if you're attracted to the lower monthly repayments, there are some disadvantages to longer-term mortgages that you should think about.
Paying more overall - A longer-term loan means you'll pay more in interest. This means your overall repayment will be higher.
So, if you do opt for a long-term mortgage, it's a good idea to make overpayments as and when you're able to. This'll help to reduce the amount you owe quicker.
That longer term - Although having a longer-term mortgage may seem like the safest option in terms of affordability, it could be trickier to manage if you ever fall into difficulty repaying your mortgage.
In the past, mortgages tended to last for a maximum of 25 years. So, if a homeowner ever had a problem with repayments, their bank might be able to extend the term – thereby making the monthly repayments more affordable.
However, if you're already in a position where your mortgage is as long as your lender's prepared to make it, you may not be able to extend the term.
This could leave you in a bad position, especially if you're an older person taking out a longer mortgage. A bank may not be willing to extend a mortgage into your old age, when you might've retired.