The most common mortgage term is 25 years. But high house prices mean more people are opting for longer-term mortgages - some lasting up to 40 years - as a way to get onto the property ladder.
Longer-term mortgages mean smaller monthly repayments, but it’s important to factor in that you’ll end up paying a lot more in interest overall. Plus, with a mortgage that lasts such a long time, you might not be able to retire as early as you’d like.
Commonly, people take out a mortgage for 25 years, but you can get mortgages with shorter or longer terms than this. Anything over 25 years is generally considered a long-term mortgage.
The number of people opting for longer-term mortgages of 30 or 35 years has been increasing, and some lenders even offer 40-year mortgage deals in certain circumstances.
With more time to repay off their loan, homeowners will have lower monthly payments but will pay more in interest overall.
Most lenders will set a cap on the maximum age you can be when you come to the end of your mortgage term. Typically, this is between 70 and 85.
With that in mind, most 40-year mortgages are only suitable for people under 30 years old. And with the average first-time buyer being in their early 30s, a 40-year mortgage wouldn’t be a feasible option for many prospective buyers.
There are some longer-term lenders that impose no set maximum age limits, though, and will instead look at each application on a case-by-case basis.
One thing lenders will want to know when considering your application is the age at which you plan to retire. They may allow you to borrow past this age if you can prove you’re contributing to a pension, for example.
With house prices and the cost of living rising, it’s increasingly difficult to save up and get onto the property ladder.
Many first-time buyers fall at one of the first hurdles - the affordability assessment. This is where the prospective lender examines your income and outgoings. They make these checks to ensure that you can afford the monthly repayments for the loan.
With a longer-term mortgage, the repayments are smaller. So, it can be easier to demonstrate that you can afford your mortgage payments, and have money left over for bills and essentials.
This is why taking out a mortgage that lasts longer than the average 25 years could mean the difference between being approved or rejected for some first-time buyers.
Up until recently, a 25-year mortgage was considered standard. But, with house prices rising dramatically over the years, more and more lenders have introduced products that increase the maximum mortgage term up to 40 years.
This is mostly to help people onto the property ladder and to enable more buyers to afford monthly repayments.
You may want to consider one for the following reasons:
Paying off your mortgage over a longer period means monthly repayments are cheaper. With household budgets stretched by the rising cost of living, this could make a mortgage more affordable, and leave you with more cash to spend on other essentials.
Lower monthly payments make them more affordable, so it may be easier to pass the affordability check and be approved for a mortgage.
Taking out a mortgage with a longer term could mean you can borrow more money than you’d be able to afford if you took out one with a shorter term.
The initial term you choose isn't set in stone. Just because you're taking out a 40-year mortgage now, doesn't mean that's how long your mortgage will end up lasting.
In fact, taking out 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 which means you can afford to reduce your mortgage term. Your lender will probably want to carry out affordability checks as part of your application to be satisfied you can afford the higher monthly repayments.
Alternatively, you could choose to make overpayments. This, in turn, can reduce the term of your mortgage.
It's worth checking if you're allowed to overpay when you take out your mortgage. Most lenders allow you to do so up to a certain limit, but some don’t.
Watch out for:
Yes, while a longer-term mortgage is a way of getting a foot on the property ladder, it doesn’t mean you have to stick with the term forever.
As long as the conditions of your mortgage deal allow it, you could make overpayments - either in lump sums or regular overpayments - to reduce the term. This will mean you’ll pay off your debt sooner and pay less in interest overall. Watch out for early repayment charges though, these will come into effect if you overpay more than you’re allowed per year.
Similarly, you could remortgage to a new deal with a reduced term. This will mean higher, regular monthly repayments, so the lender will carry out the necessary affordability checks and you need to feel sure you can maintain these higher payments before committing.
Yes, but there won’t be as many lenders offering them compared to more standard-length terms.
In some cases, you may simply be too old to qualify for a loan that spans such a long time period. Most lenders set a cap on the maximum age you can be when you come to the end of your mortgage period. Read the eligibility criteria for a loan before you consider applying.
You need to consider all the implications of this kind of mortgage now and in the future.
Smaller monthly payments now might help ease financial pressures for the moment. But taking such a long time to pay off your mortgage will mean you pay far more in interest overall. You may also be forced to carry on working past your intended retirement age to afford the repayments.
Review your situation going forward and, when you can afford higher monthly repayments, it’s a good idea to either make overpayments or to remortgage to a shorter-term mortgage, so you repay the balance quicker and end up paying less in interest overall.